Discount-retailer Dollar General Corp. (DG) recently unveiled its 11,000th outlet in Murfreesboro, TN. With this store opening, Dollar General emerges as one of the retailers operating maximum number of stores in the Unites States.
Dollar General has opened 375 new outlets and remodeled or relocated 377 stores during the first half of 2013.The company plans to open about 650 new stores, up from 635 projected earlier in fiscal 2013. Moreover, it hopes to remodel or relocate about 550 stores.
Since 2007, Dollar General has provided nearly 30,000 new jobs and the company anticipates to create about 6000 new jobs in 2013.
Tennessee-based Dollar General -- which competes with Ross Stores Inc. (ROST), Costco Wholesale Corp. (COST) and Dollar Tree, Inc. (DLTR) -- trades in low priced merchandise typically $10 or less in four categories, namely Consumables, Seasonal, Home products and Apparel.
We believe that the company’s commitment toward better price management, cost containment, private label offering, effective inventory management, merchandise and operational initiatives will likely drive sales and margin growth. Moreover, in order to drive traffic, Dollar General is focusing on both consumables and discretionary categories.
Further, Dollar General’s history depicts impressive comparable-store sales growth. The company’s comparable-store sales remained robust despite unfavorable macroeconomic conditions mainly due to competitive pricing and attractive store expansion strategies, including remodeling and relocations. Notably, fiscal 2012 marked the company’s 23rd consecutive year of comparable-store sales growth.
However, increase in gross margin pressure due to rising sales of low margin-carrying products, macroeconomic factors and competitive pressure pose challenges to Dollar General’s growth in the near term.
Additionally, Dollar General could face market cannibalization if it further expands in the geographies where it already exists.
Currently, Dollar General carries a Zacks Rank #2 (Buy).