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GOODLETTSVILLE, Tenn. — Dollar General Corp. has responded to a persistently challenging operating environment with a number of initiatives, including a change in leadership, intended to restore top-line and bottom-line growth. However, some Wall Street analysts expect that the process may take several quarters in view of the economic pressures on the retailer’s core lower-income customers.
In a move that surprised some analysts, last month the company replaced chief executive officer Jeff Owen with his predecessor, Todd Vasos. Vasos had served as CEO from June 2015 to November 2022, a period that saw the retailer expand its store base by about 7,000 outlets and increase annual sales by more than 80%, while more than doubling its market capitalization to approximately $58 billion.
The appointment of Vasos was clearly intended to restore confidence, particularly among investors. “The board believes Todd is the right leader to refocus the company’s strategic direction and priorities to stabilize the business,” said Michael Calbert, chairman of the Dollar General board of directors, at the time of the appointment. “Since Todd’s retirement in April, he has remained active as a member of our board and is acutely aware of the challenges facing our business and the industry more broadly. We are confident Todd’s deep expertise and familiarity with Dollar General, as well as the strong relationships and respect he has maintained with our executive team, will support a seamless transition.”
The leadership change followed a succession of disappointing financial results, including four consecutive quarters of missing analysts’ consensus earnings targets. The company had twice lowered its guidance on fiscal 2023 adjusted earnings per share and same-store sales. As a result, Dollar General’s share price by mid-November had plunged 52% since the start of the year.
A number of measures were launched before the leadership transition, including promotional markdowns, particularly in nonconsumable categories, intended to lower swollen inventory levels. Although that move will put further pressure on operating profit, it is expected to spark customer traffic as well as reduce excess inventory.
In addition, the company announced that it would increase its planned investment in incremental retail labor from $100 million to approximately $150 million. According to Seeking Alpha, Vasos in an interview expressed doubt that the full $150 million investment will be necessary, and identified in-stock levels as the biggest execution issue at present, adding that it is highly “fixable,” since 90% of out-of-stocks are mainly core domestic goods with relatively short lead times.
