Has produce-selling Dollar General become a real threat to traditional grocers?
Dollar General continues its push into groceries. On the chain’s latest earnings call, CEO Todd Vasos said recent remodels have expanded the number of cooler doors in stores. It has also begun testing sales of fresh produce in its traditional dollar stores and early results suggest that a wider pilot may be warranted.
The dollar store chain’s sales in the first quarter increased 6.5 percent while its comps eked out a 0.7 gain. Dollar General attributed the mini same-store gain to the Internal Revenue Service sending out refund checks later this year as well as the Easter holiday falling later on the calendar than in 2016.
Mr. Vasos said sales of consumables were up mid-single digits in the most recent quarter and the chain has increased its market share based over the past four, 12, 24 and 52-week periods, based on syndicated data.
Dollar General is in the process of remodeling about 300 traditional stores. The remodels, according to Mr. Vasos, have increased the number of cooler doors to 34 per location, a 160 percent increase. The change allows stores to offer a greater variety of perishables, which has helped drive both customer visits and market basket size.
About a third of the remodeled stores are testing fresh produce. “While it’s still very early, initial remodels are yielding strong same-store sales improvements,” said Mr. Vasos (via Seeking Alpha). The chain already sells produce in its Dollar General Market stores.
Word-of-mouth about remodeled stores with increased access to “better-for-you type products” in refrigerated and frozen foods has helped Dollar General’s comps. The introduction of produce gives consumers more reasons to shop for groceries at the chain’s traditional stores.
“We’ve been in the produce business for only a short period of time in these stores, but we’ve got a lot of experience with them in our market stores,” said Mr. Vasos. “And we’ve taken the learning’s from those and applying them (at remodeled stores).”
Dollar General operates more than 13,600 stores in 44 states.
- Dollar General Corporation Reports First Quarter 2017 Financial Results – Dollar General Corporation
- Dollar General’s CEO Todd Vasos on Q1 2017 Results (Earnings Call Transcript) – Seeking Alpha
DISCUSSION QUESTIONS:Do you see the addition of produce to Dollar General’s traditional stores as a viable tactic for growth going forward? Is the pursuit of grocery share a wise course for Dollar General to take in a market that has seen increased price competition from Walmart while hard discount chains Aldi and Lidl are preparing to ramp up locations in key markets across the U.S.?