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Dollar General Eyes Home Goods Growth

Cecile Corral, Staff Staff -- Home Textiles Today, February 23, 2009

After ramping up its consumable business over the past year, Dollar General is now turning its attention to the non-consumable business — including home — to fix its flaws by yearend, when executives hope the economy will begin to improve.

"We're obviously making these changes in an environment that is much tougher than it would have been a year or year-and-a-half ago," said Richard Dreiling, chairman and ceo, during the discount chain's presentation at the Goldman Sachs Second Annual Consumer/Retail Leveraged Finance Conference prior to reporting its fiscal results.

"But the changes we are making will take about nine or 10 months for everyone to see," he continued. "As we make those changes, that's where we believe ultimately we can get some more gross [margin dollar] enhancement."

Apparel is one component of this business, and already the retailer said it is seeing some improvements, resulting from improved focus on trend shifts. "We're getting closer to those fashion windows without sticking our necks out on something that could be a little controversial with regards to its appeal," Dreiling said.

Heading this effort for Dollar General is the recently appointed Jeff Elliott as svp and gmm of apparel, home and seasonal. He reports to Todd Vasos, evp, division president and chief merchandising officer. Elliott was most recently at multiple nameplate apparel retail group Charming Shoppes Inc., where he served as president of Charming Outlets.

"He is very masterful in his understanding of the non-consumable side of our business," Dreiling said. "And we're now beginning the journey of really fixing that side of the business."

Dreiling added that Dollar General — which operates 8,362 stores in 35 states — intends to "make some very major changes in our soft goods presentation, home décor. We are committed to drive the non-consumable side as hard as we are driving the consumable side."

Store count is also slated for expansion. Planned for 2009 are 450 new units and 400 relocations and/or remodels — all of them concentrated in the chain's current 35 states. During fiscal 2008, the company opened 207 new stores, relocated or remodeled 404 units, and closed 39.

Dreiling said in spite of this hefty push for new doors, Dollar General "is and always will be a same-store-sales story. We believe that the box has to always be productive. And the secret of success is not going out and opening a bunch of new stores.... We are focused on all of our stores and making them all productive."

Dollar General also recently hired a "sourcing executive," he added, and is growing that team. The retailer already operates a global souring office in Hong Kong.

In advance of the Goldman Sachs conference, the company released its preliminary Q4 and full fiscal year results, which will officially be reported in March.

It came as no surprise that consumables continued to be the driving force, where fourth-quarter sales jumped 11.2% to $2.85 billion compared to the same period in 2008, and comps rose 9.4%.

Dollar General reported full-year 2008 sales of $10.46 billion, up 10.1% from $9.50 billion on year ago, with comps up 9%.

But not all the news was good — sales of the neighborhood discount chain's seasonal merchandise and other discretionary items were impacted "by the weak economy as well as a shorter holiday selling season," Dollar General stated. Included among those was the home products category, with Q4 sales of $231.4 million, down 5% from the year-ago period.

By contrast, the consumables category was up by 18%, to $1.9 billion.

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