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Dollar General Climbs as Bid to Entice New Shoppers Pays Off

Nick Turner

A makeover at Dollar General Corp. is beginning to get results.

The retailer posted strong sales on Thursday, boosted by new customers streaming into the discount chain. Shopper traffic -- and the amount they spent -- grew in the third quarter, helping send the shares on their biggest rally in about six months.

Dollar General has been upgrading its stores and adding hundreds of new locations -- part of a bid to go after a broader swath of shoppers, including a more upscale consumer who might not typically visit a dollar store.

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“We are encouraged by the early progress,” Neil Saunders, managing director of GlobalData Retail, said in a note. “The company is capturing a more significant share of spending from middle income and more affluent Americans.”

Third-quarter profit amounted to 93 cents a share, missing analysts’ estimates by a penny. But comparable sales growth -- a closely watched measure -- came in at 4.3 percent. Analysts had projected 2.7 percent, according to Consensus Metrix.

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The company now expects sales to grow 7 percent this year. It had previously forecast a range of 5 percent to 7 percent. It also narrowed its profit guidance, saying earnings would be $4.37 to $4.47 a share.

The stock gained as much as 6.3 percent to $96.60 on Thursday, marking the biggest intraday increase since June 1. The shares had climbed 23 percent this year through Wednesday’s close.

At a time of broader retrenchment in the retail industry, Dollar General is on a store-opening binge. Next year, it plans to add 900 new locations and remodel 1,000 current stores. It’s also relocating 100.

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“Almost 75 percent of the population now live within five miles of a Dollar General store,” Saunders said. “This makes the company the closest and most convenient general merchant for millions, especially those living in rural areas.”

Updates shares starting in second paragraph.

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