Dollar General ready to attack soft goods

Goodlettsville, Tenn. – Neighborhood discounter Dollar General, coming out of a remarkably good 2008, is ready to extend its merchandising power from consumable products to softlines.

The $10.4 billion retailer is “just as committed to driving the non-consumable side of the business” as the consumable side, said chairman and ceo Rick Dreiling to analysts on today’s earnings call.

For the year ended January 30, the 8,400-store company recorded net income of $108.2 million vs. the net loss of $12.8 million during the prior year (which included the transition of Dollar General from a publicly held to a privately held company).

Sales of $10.4 billion were up 10.1% from $9.5 billion; comps grew by 9.0%.

During the past year, Dollar General has made measurable gains in sales, margin, cost control, and profits – and even worker morale. The full senior executive staff is now in place, Dreiling noted. He added, “Our store manager turnover at its lowest level in 15 years.”

Dreiling said the company is already making changes in the buying and merchandising of its soft goods side, and expects to see real results by end of year. Dollar General, he said, has just completed its 19th consecutive year of same-store sales growth, and believes it is experiencing more traffic from “trade-down” consumers. He spoke of “a new consumerism” and said he believes that “saving money is going to be popular for a very long time.”

Dollar General intends to capitalize on these trends. Its greatest gains have been in its largest segment, which it calls the “highly consumable” category, and which registered a 14.7% increase in sales year-to-year. “Seasonal” goods edged up just 0.5%, and the main softlines segment, “basic clothing,” turned in a 3.8% rise.

The fourth segment, however, “home products,” saw sales fall 0.9% in 2008. Management is signaling that will no longer be acceptable; indeed the company is targeting those “trade-down” shoppers and others as it shapes up its sourcing and buying leadership in the apparel and home segments.

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