RetailWire Discussion: Timing Everything in Dollar General IPO

By George Anderson

As most who follow retailing know, the recession has meant a lot more business for dollar stores as consumers try to stretch their bucks as far as they can.

Many of the dollar store chains have welcomed this extra business and taken steps to try and hold onto a group of new consumers who have flooded the channel during the downturn.

Dollar General has been among the chains benefiting most during this period. The company, which was bought and taken private by Kohlberg, Kravis & Roberts in 2007, is rumored to be looking at going public once again to take advantage of its strong position in the marketplace.

According to a Wall Street Journal report, Dollar General saw profits during the quarter ending May 1, grow from $5.9 million in 2008 to $83 million this year.

"It's pretty good timing," Stacey Widlitz, an equity analyst with Pali Research, told The Tennessean. "I think the trends are certainly with them."

Dollar General is looking to increase its store count by 450 stores this year from the 8,362 it ended '08 with. The chain has stores in 35 states.

Discussion Questions: What will an IPO mean for Dollar General as a business? KKR financial concerns aside, would the company be better off going public or staying private?

Discussion Questions

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Comments:

Dollar General is in a fine position to go public again. They're on the right track toward shopper-centricity and certainly the longer term economic softness helps. My concern is really more about the long term play. There are just so many rural locations that seem to be run by the seat of their pants, it's hard to imagine the chain as a whole can have any level of corporate consistency overall.

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Anne Howe, Founder, Anne Howe Associates

Which is the chicken and which is the egg? KKR will get a bucket of gold from the IPO, Dollar General will continue to expand aggressively, sales will likely outpace profits, the new non-retail shareholders will soon push Dollar General for greater profits such as have been generated in the past few years. If they don't come, the wrestling will start. At this stage, I'm inclined to think an entrepreneur founder would be the best operator. Thus, I say opt for staying private right now. But that's not the way the game will be played. As Walter Cronkite might say, "And that's the way it is."

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Gene Hoffman, President/CEO, Corporate Strategies International

Strike while the iron is hot, an IPO now is perfect timing for KKR and Dollar General. I don't think KKR bought DG to sit on them, they wanted to make money off of the deal and now is the perfect time. If you haven't been in a Dollar General or a Family Dollar or even a Dollar Tree lately you'd be surprised what you find when you walk in. They are well maintained, well merchandised and provide value beyond just the low price. It will be interesting to see how many of their current clients they will be able to retain after the economy bounces back.

Scott Knaul, Director, Retail Strategic Services, Workforce Insight

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Timing Everything in Dollar General IPO

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