Amid sales surge, Dollar General plans 900 new stores

Dive Brief:

Dollar-store retailer Dollar General announced Thursday plans to open approximately 900 new stores and relocate or remodel 875 stores in fiscal 2016, with plans to open even more in coming years.
The retailer also reported fourth quarter sales, which grew 7% to $5.3 billion. Same-store sales increased 2.2%, thanks to increased customer traffic and transaction size.
Full year sales grew 7.7% to $20.4 billion and full year profits grew 9% to $1.17 billion. The company said sales strength was mostly in candy and snacks, perishables, tobacco, and food, as well as in seasonal and home goods. The retailer saw a small decline in apparel sales.

Dive Insight:

Stagnant wage growth and financial troubles for lower- and middle-income Americans are vexing many other retailers, while they continue to boost discount stores like Dollar General.

"Looking ahead, Dollar General continues to have significant opportunities for growth,” Dollar General CEO Todd Vasos said in a statement.

The retailer’s results show that Wal-Mart’s move to exit the space by shutting down its Wal-Mart Express stores, designed to compete with dollar stores, could haunt it. Instead of targeting the lower income customer that it has traditionally catered to in the past, Wal-Mart has chosen to pursue a more monied customer with improved grocery offerings and tidier stores.

“[W]hile the need for Wal-Mart to move to serving a wealthier clientele is real, it’s going to be a difficult task to reframe Wal-Mart in that consumer’s mind," retail futurist Doug Stephens told Retail Dive earlier this year. "Sam Walton committed his life’s work to positioning and retrenching Wal-Mart as a chain built by and for the middle-class. To move further up-market means fighting a strong current of corporate DNA, not to mention risking turning off existing customers. It’s the proverbial ‘rock and hard place’ scenario.”

Dollar General's new store openings include the market that Wal-Mart just left: small format stores in highly populated areas and rural locations, according to Reuters.