Dollar General plans to open 1,000 new stores in 2017

Dive Brief:

Dollar General announced plans on Wednesday to open approximately 1,000 new stores over the course of fiscal 2017, in line with its model of 6-8% growth in square footage, according to a news release.
The dollar retailer also pledged to relocate or remodel 900 existing locations in the fiscal year ahead.
Earlier this month, Dollar General said it plans to open approximately 900 new stores in fiscal 2016 and relocate or renovate another 875 stores.

Dive Insight:

While rival retailers continue to struggle with the impacts of stagnant wage growth and other financial challenges vexing lower- and middle-income Americans, discount stores like Dollar General are thriving.

Fresh off reporting fourth-quarter sales growth of 7% and same-store increases of 2.2%, Dollar General is now forecasting annual sales growth in the range of 7% to 10%, promising investors earnings per share between 10% to 15%.

Ahead of its 2016 Investor Conference Thursday, Dollar General CEO Todd Vasos said the company plans to open around 1,900 new stores before the end of fiscal 2017, and overhaul close to 1,800 existing locations over the same timeframe. Dollar General opened 730 new stores in 2015, and remodeled or relocated 881 stores.

As of early 2016, Dollar General operates more than 12,400 stores in 43 states. "We see a long runway to growth, with potential for nearly 20,000 Dollar General stores over time," Stifel Nicolaus analyst Taylor LaBarr recently told CNBC.

Dollar General’s success calls into question Wal-Mart’s decision to shutter its Wal-Mart Express effort. The small-format stores were designed to compete with dollar stores, but Wal-Mart has instead opted to pursue a deeper-pocketed customer via improved grocery offerings and more aesthetically appealing stores. Dollar General has said it plans to open 80 smaller stores in more urban markets, potentially capturing the demographic Wal-Mart Express abandoned.

Edward Jones analyst Brian Yarbrough recently told Reuters that customers prefer Dollar General's stores to Wal-Mart's "supercenters" for small purchases, citing Dollar General’s smaller size and convenient locations. "[Dollar General has] shown the consumer, 'We are convenient, our prices are competitive with the Wal-Marts of the world, much better priced than the drugstores,'" Yarborough said. "That's where you've seen them take a lot of [market] share."