Dollar General on the march

dgsignBIZMOLOGY — Dollar General is advancing as the gap between the haves and have-nots widens.

With the worst recession since the Great Depression behind us, one might expect Dollar General’s appeal to consumers to decline. Not so, according to the company, which yesterday reported record results for 2012. Net income rose 24% vs. the prior year, with sales climbing 8% to $16 billion, and same-store sales rising nearly 5%.

The Tennessee-based chain plans to open 635 new stores this year, pushing its store count north of 11,000 locations nationwide. That’s after adding more than 600 stores in 2012. Indeed, the retailer is confident that the US market is capable of supporting up to 20,000 of its stores, which are relatively cheap to build and operate. Dollar General’s rapid growth puts it on par with ubiquitous 7-Eleven, with more than 10,000 convenience stores in North America, and surpasses Walgreen, which has blanketed the US with more than 8,000 of its drugstores.

Dollar General is uniquely well positioned to capitalize on current trends in retailing and the economy. “We grew our market share and invested strategically to continue to win with our customers,” said CEO Rick Dreiling, commenting on last year’s strong results. Its core customer is the economically challenged consumer who continues to trade down (from supermarkets, drugstores, and other discount chains, including Wal-Mart) despite the upturn in the economy. “That customer continues to be one of the segments that we continue to grow, so we’re very, very bullish about 2013,” Dreiling adds.

Structural changes in the US economy (including the erosion of a middle-class standard of living) and a smart and simple business model make Dollar General a lot less cyclical than many other retailers. 2012 marked the chain’s 23rd consecutive year of same-store sales growth with no slowdown in sight.

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Photo by Steve Snodgrass, used under a Creative Commons license.
Alexandra Biesada

Alexandra Biesada shops everyday, whether she wants to or not, and pines for the days when it was strictly a recreational activity. She has covered the retail beat for Hoover’s since 2001. Follow her on Twitter.

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