Dollar General will build bigger stores, expand the Popshelf brand

Dollar General is doubling up on physical stores, building larger stores and expanding Popshelf, a new chain aimed at high-income suburban customers.

On Thursday, the distributor made aggressive plans for the fiscal year, which included opening 1,050 stores, renovating 1,750 locations and relocating 100 others.

As she builds new stores, customers will see larger sales areas and more merchandise. They will also notice more branding for Popshelf, which the retailer debuted in the fall. The company is testing new locations and using the brand to create a store within a store.

Sales of staple and essential foods helped drive Dollar General’s sales growth during the pandemic, as consumers cooked more at home and controlled their budgets during a period of economic uncertainty. Its same store sales increased 16.3% in the fiscal year.

In recent months, however, the shares of pandemic beneficiaries – including Dollar General – have plummeted as investors bet that Americans will embezzle their dollars to dine out and travel as soon as they are vaccinated. In a Thursday earnings conference call, US Dollar General Todd Vasos argued why investors should continue to bet on the company. He said the retailer could increase profits by increasing its footprint, selling more non-consumable items that have higher margins than food and attracting a wider range of customers.

Chief Operating Officer Jeff Owen said the retailer estimates it could add up to 17,000 stores across the country – a change that would almost double its footprint.

“Overall, our property portfolio remains robust and we are excited about the significant new store opportunities that lie ahead,” he said.

As Dollar General adds, remodels and relocates stores, said Owen, who will increase the square footage of his sales area to make more room for coolers and fresh meat, a wider range of health and beauty products and additional boxes.

Vasos said Dollar General tested the larger store formats in 2020 and found that they outperformed the rest of the chain with higher sales. It already has some larger stores with a wider variety of food and merchandise in general.

Dollar General also plans to build 50 Popshelf stores by the end of the fiscal year, more than its original target of 30, Owen said.

The retailer opened the first two Popshelf stores in the fall near Nashville, Tennessee. Popshelf sells home decor, beauty items, cleaning supplies and party products, with almost all items costing $ 5 or less. Its target client has an annual family income ranging from $ 50,000 to $ 125,000 – higher than the annual family income of $ 35,000 to $ 40,000 for a typical Dollar General client, according to the company.

Owen said Popshelf stores offer “a fun, affordable and differentiated treasure hunt experience, delivered through continually renewed merchandise.” He said the company wants to expand from its current 5 stores faster than planned because of the results it saw.

Dollar General will launch a pilot that combines its namesake brand and Popshelf, he said. At 25 stores, customers will see signs for both brands at the entrance. Inside, Popshelf will be featured in the center as a store within the store, he said.

The tests will focus on areas where customer demographics are somewhere between Dollar General and Popshelf – with a family income range of $ 50,000 to $ 75,000, said Vasos.

“If it works – and we believe it will work – there may be a few others that we will do in 2022 and many more as we continue to move forward,” he said.

The company’s stock rose about 21% last year, at the close of Wednesday. They fell less than 5% on Thursday afternoon. Previously, the company reported earnings in the fourth quarter that did not reach estimates and predicted that same-store sales would fall by 4% to 6% in the next fiscal year against the exceptionally high sales levels caused by the pandemic. Looking at a two-year period, Dollar General’s forecast implies annual same-store sales gains of 10% to 12%.