Sunday, September 5, 2010
Quartely Report
On August 31, 2010 Dollar General reported record 2nd quarter sales and earnings. It appears that the strategic plan they have set in place is definitely working. They have measured their improvements by gauging the growth of sales increases and operating profit. Their adjusted net income increased by 55% TO $145 million. Please visit their newsroom for more... http://newscenter.dollargeneral.com/ I had a comment earlier about why I thought they were right on track with their strategic plan. The opening of many stores alone is not really an indicator that their strategic plan is working. We watched this plan from Starbucks backfire as they had to close the many new stores they had opened. Compared to Starbucks heavily saturation in large business areas the target market was definitely off. They were stealing their own customers from another store. Dollar General is choosing to open these new stores in heavily populated rural areas and it is working in my opinion to keep those customers from having to drive the extra 15 miles to the closest Walmart.
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They are also opening stores in tiny communities with sparse population. Dollar General is great if you just need to grab an item or two. But, they don't have the inventory to attract serious shoppers. I'm just skeptical about this massive expansion effort. It will be very interesting to watch their development.
ReplyDeleteInvestors have responded positively, with stock price rising 2-3% since the announcement. Interesting to see same-store sales up 5% for the quarter. I wonder to waht extent DG's product line is considered inferior goods, in which case they would be expected to flourish in the present economic state.
ReplyDeleteIn Western Kentucky they have had great success in rural areas. It is so nice to be able to get a few things in a small town like Nortonville without driving to Madisonville. I have been surprised in the last month that they have added a new store in Madisonville (bringing the total to four covering all sides of town) and they built a new store to replace one already in place. Possibly they rented before and prefer ownership or possibly they realized the store was run-down. Either way, the two new stores are nice and seem to always have a crowd!
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