Dollar stores continue to increase food and beverage offerings

A story in Supermarket News earlier this month reports that Dollar General and Dollar Tree are pushing ahead with plans to increase their food and beverage offerings.

Dollar General

Dollar General reported that consumable sales rose significantly in the quarter ending May 4, which helped the company fuel a gain in total sales as well as same-store sales compared to the same quarter a year ago.

"We recently launched a better-for-you offering intended to provide our customers with healthier consumable options at affordable prices," said Dollar General CEO Todd Vasos. "Over time, we expect this offering to include more than 130 products."

Vasos also said the company will roll out Good & Smart, a new private label that will represent about 75% of the better-for-you product portfolio.

Furthermore, Dollar General plans to remodel locations with fewer than 12 cooler doors, as Vasos anticipates that the entire store base will have an average of 20 cooler doors by the end of fiscal 2018 (up from an average of 10 cooler doors in 2012).

The company plans to open 900 new stores this fiscal year, remodel 1,000 mature stores and relocate about 100 stores. Dollar General has nearly 15,000 stores in 44 states.

Dollar Tree

Dollar Tree President and CEO Gary Philbin reported that the company plans to expand its Snack Zone concept, which is designed to provide customers with an assortment of consumption products at the dollar price point to drive incremental sales.

The chain added Snack Zones to 214 stores in the most recent quarter, and plans to bring it to 750 more stores in fiscal 2018.

"Our customers are excited with the introduction of the Snack Zone - great values across categories of cold beverages, candy and snack cakes, salty treats and other favorites that bring our customers back to those treats they crave," explained Philbin.

At Dollar Tree's Family Dollar stores, consumables have been a focus in store remodels. Remodeled stores have expanded beverage and snack stands, and an added assortment of food in coolers and freezers.

Dollar Tree has nearly 15,000 stores (Dollar Tree and Family Dollar combined).

Dollar General expanding store count, adding fresh produce

According to an article in Supermarket News, Dollar General plans to add 900 new locations this year and pending a successful market test, will add fresh produce to hundreds of remodeled locations.

The company has introduced "traditional plus" stores that include 34 cooler doors to merchandise an expanded perishables assortment (by year-end, the company expects to have an average of 20 cooler doors per store, up from 10 in 2012). And of the 750 traditional plus stores that are expected to be in operation by the end of the year, about 450 will carry fresh fruits and vegetables.

According to Dollar General CEO Todd Vasos, "The ability to offer produce, particularly in areas with limited grocery availability, represents an attractive growth opportunity for Dollar General in the years ahead."

The company also plans to roll out an expanded assortment of better-for-you products at select stores, with a focus on high protein and low salt options.

Dollar stores not being hurt by big retailer price wars

Despite analysts' fears that dollar stores could become collateral damage in the price wars being waged between big retailers like Walmart and Kroger, sales forecasts for Dollar General and Dollar Tree remain strong. Dollar General expects net sales to increase by five to seven percent for the year ending February 2, and Dollar Tree expects a similar increase for the year ending in January.

In contrast, Walmart and Kroger anticipate low single-digit growth.

"The big advantage that dollar stores have is that, given their store footprint and the real estate they need, they can exist in small towns where Walmart or supermarkets are not going to go," according to Euromonitor analyst Jared Koerten.

In an article last month, The New York Times said that dollar stores, which operate on razor-thin margins, are sprucing up stores, stocking more national brands, selling food and fresh produce, and opening more stores.

Moody's analyst Mickey Chadha added that "dollar stores... also offer home products, seasonal products, electronics, apparel and accessories that are higher margin."

Walmart reacting to Lidl with aggressive pricing

Reports state that Walmart is reacting "quickly and aggressively" to Lidl's entry into the U.S. market. According to its website, Lidl now has 21 stores open in three states - North Carolina, South Carolina and Virginia - with plans in the next year for as many as 100 more in states from New Jersey to Georgia.

Since its first U.S. stores opened in June, Lidl has been hailed as the low price leader along with rival Aldi. But according to Rupesh Parikh, an analyst at Oppenheimer & Co., "Walmart is being really aggressive in terms of watching what Lidl, and presumably Aldi, are doing, and you can tell they are in a fight and not willing to give up customers."

"We found Walmart prices on like-for-like items were very compettive with both Lidl and Aldi," Parikh said.

Parikh also reported that several other retailers in current Lidl markets were reacting with lower prices, including Food Lion, Family Dollar, Dollar General and Target. The most aggressive pricing by all the food retailers has been in the private label category, which Parikh believes could lead to higher margins on other products in order to keep overall profits from falling.

Lidl's next U.S. market is likely to be Texas, where the German company recently opened a number of offices.

Dollar General acquires 41 Walmart Express stores

Dollar General announced this summer that it purchased 41 former Walmart Express stores and would relocate 40 existing stores to these sites this fall. Walmart Express was the small format concept that Walmart abandoned last year. At 12,000 - 16,000 square feet, they are significantly larger than traditional Dollar General stores, so the sites will allow for the larger "DG16" format, which include additional coolers and other store enhancements.

According to Dollar General, "the DG16 layout is designed to expand traffic-building categories in a more customer-friendly format with faster checkout." Initial rollout of the format has reportedly increased sales of perishables and front-end items.

The acquired stores are generally in the southern U.S.

Dollar General wants to double its store count

Dollar General announced last week that it is targeting up to 13,000 potential sites in the continental United States. If they are successful in opening stores in all the targeted locations, the company would double its current store count.

"In trade areas where you probably only need one store for the next seven to 10 years, I'd rather it be a Dollar General, and that's how we are looking at our portfolio as we go forward," said CEO Todd J. Vasos.

900 new stores are scheduled to open in 2016, and 1,000 more in 2017.

Vasos said Dollar General has already identified about 800,000 "seed" points, or areas where people congregate. He says the company plans to narrow that number down to 13,000 by looking at several factors, including demographics, population density, competition, and through its own proprietary data.

Dollar General sees opportunity in consumables

Dollar General cited stagnant wages relative to rising consumer prices, and negative income growth projected through 2020 for customers earning less than $50,000, as reasons for the company's plan to capture additional customers through improvements in its consumables assortment.

CEO Todd Vasos claimed earlier this year that based on current sales, Dollar General has significant growth opportunities in health and beauty, food, candy and snacks, and perishables. To that effect, the company plans to expand the health and beauty category, boost perishables offerings with more coolers per stores, expand its ready-to-eat assortment, and expand its ready-to-consume beverage and snack offerings in high-profile areas.

In order to make room for the additional products, space will typically be reduced in apparel, home and housewares, and in declining food categories like dry cereal.

Walmart to close 269 stores, including all Express stores

Walmart announced last week that it plans to close 269 stores, including all of its 102 Walmart Express small-format stores. Of the store closings, 154 will take place in the U.S.

According to Walmart, the impacted stores represent less than 1 percent of the 11,600 stores worldwide and will impact 16,000 employees (10,000 in the U.S.).

The small-format stores, typically in the 12,000 - 16,000 square foot range, began to roll out in 2011. Walmart envisioned thousands of Express stores and hoped they would compete well with discounters like Dollar General.

Instead, Walmart will now focus on strengthening Supercenters, optimizing Neighborhood Markets, growing its e-commerce business and expanding pick-up services.

The U.S. closures include 23 Neighborhood Markets, 12 Supercenters, seven stores in Puerto Rico, six discount centers, and four Sam's Clubs. There are no closures planned for the Greater Philadelphia Region.

Walmart said that more than 95% of the closing stores in the U.S. are within 10 miles on average of another Walmart.

The company plans to open 50-60 Supercenters, 85-95 Neighborhood Markets, and 7-10 Sam's Club locations in fiscal 2017.

Dollar General to open 900 stores in 2016

Dollar General said earlier this month that it plans to open 900 new stores in 2016, compared to 730 store openings in 2015. The new stores are planned for urban, suburban and rural locations.

The company also announced its third quarter earnings. Net income rose 7.2% (compared to the previous year's third quarter) to $253 million, and sales increased 7.3% to $5.1 billion.

For the first three quarters, net income climbed 11.1% to $789 million, and sales increased 8% to $15.1 billion.

CEO Todd Vasos told investors that Family Dollar plans to begin rolling out a new prototype in early 2016 that features a more customer-friendly layout, faster checkouts and optimized assortments. The prototype will also increase the number of products offered in coolers, with "anything from immediate-consumption beverages to additional frozen, dairy and perishable-type products."

Dollar General to increase sale of perishables, health and beauty products

Dollar General announced recently that the company is working on a new store prototype that will provide more fresh foods and health and beauty products. The rollout will begin in 2016 with all new stores and remodels.

CEO Todd Vasos said the new stores will have more coolers, which mean more perishables, and "perishables drive trips and basket size."

Vasos added that Dollar General also plans to expand offerings in areas like hair care, cough and cold, skin care and nail care.

Dollar General plans for aggressive expansion

Dollar General announced in March that it achieved record results and plans to accelerate its store expansion plan by opening 730 new stores in 2015 and remodeling 875 others. The company opened 700 news stores in 2014.

The announcement came shortly after Dollar General's failed attempt to acquire Family Dollar, with whom Dollar Tree reached an agreement to merge.

Dollar General's sales increased 8% to $18.9 billion in 2014, and same store sales increased 2.8%. Net income increased to $1.065 billion, compared to $1.025 billion in the prior year.

Family Dollar approves deal with Dollar Tree

It was announced this morning that Family Dollar shareholders approved the proposed $8.5 billion merger with Dollar Tree, ending months of speculation over whether Dollar Tree or Dollar General would merge with Family Dollar.

According to reports, the combined companies will operate more than 13,000 stores in 48 states and Canada, with sales of more than $18 billion.

As previously reported (and blogged about: Family Dollar rejects Dollar General's higher offer, to pursue deal with Dollar Tree; and Dollar General not giving up on Family Dollar acquisition), Dollar General offered $9.7 billion, but in order to approve such a deal, the Federal Trade Commission would require about 4,000 store divestitures, compared to about 300 for the deal approved today.

After Family Dollar twice delayed the shareholder vote, Dollar Tree threatened to walk away from its offer if the deal wasn't approved this week.

The companies expect the deal to close as early as March. Dollar Tree CEO Bob Sasser will lead the merged company, with Family Dollar CEO Howard Levine reporting to Sasser.

Dollar General may be out of the bidding for Family Dollar

It was reported earlier this week that analysts believe Dollar General may be dropping its bid for Family Dollar. The reason cited is the Federal Trade Commission's requirement for up to 4,000 store divestitures as a result of a deal between the two companies. A deal between Family Dollar and Dollar Tree would require only about 310 store closures.

According to Family Dollar Chairman and CEO Howard Levine, "The Family Dollar board of directors continues to be of the unanimous view that the current Dollar General proposal is not reasonably likely to be completed on the terms proposed."

Given that Dollar General hasn't increased its store divestiture commitment or its purchase price, one analyst concludes that they are effectively bowing out of the process.

 

Dollar General not giving up on Family Dollar acquisition

Dollar General CEO Rick Dreiling said earlier this month that his company remains committed to acquiring Family Dollar, who has already agreed to be purchased by Dollar Tree, pending government approval. (See Family Dollar rejects Dollar General's higher offer, to pursue deal with Dollar Tree.)

Dreiling said Dollar General expects to provide Family Dollar shareholders with an update on its offer prior to Family Dollar's December 23 shareholder meeting.

According to an industry analyst cited in a Supermarket News story, "From an economic perspective, Dollar General has room to raise its bid, although unless it has very good visibility on the Federal Trade Commission's thinking on store divestitures, there would likely be a limit beyond which it could go."

Over the summer, Dollar Tree offered $8.5 billion for Family Dollar Stores, which was followed by Dollar General's $9.2 billion cash offer. Family Dollar chose to pursue the Dollar Tree bid, stating that "a transaction with Dollar General has a high likelihood of not closing due to antitrust considerations."

Family Dollar rejects Dollar General's higher offer, to pursue deal with Dollar Tree

Last week I blogged about Dollar Tree's $8.5 billion deal for Family Dollar Stores, which was followed by Dollar General's $9.2 billion cash offer for the same company. A few days ago Family Dollar rejected the higher offer and said it will pursue its prior agreement with Dollar Tree, citing antitrust considerations.

Dollar General said it would be willing to divest up to 700 stores to make the merger with Family Dollar feasible, but Dollar General said it "will not jeopordize the Dollar Tree deal for a transaction with Dollar General that has a high likelihood of not closing due to antitrust considerations."

According to experts and analysts, the saga isn't over, as they believe Dollar General may have expected the negative response and may even be preparing to increase their offer, an offer that could top $10 billion.

Dollar General and Dollar Tree fighting for Family Dollar Stores

In late July it was announced that Dollar Tree would buy competitor Family Dollar Stores in a cash and stock deal worth $9.2 billion, and that both companies unanimously approved the merger. However, reports today said that Dollar General offered $9.7 billion in cash for Family Dollar.

Today's move by the top dollar store in the U.S. is widely seen as a defensive move, as a Family Dollar - Dollar Tree combo would represent a long term market share threat. However, some analysts expect Dollar Tree to make a counteroffer, since the acquisition would do more to transform Dollar Tree's business than it would for Dollar General, which is more similar to Family Dollar.

According to a Bloomberg story, the combined Dollar General - Family Dollar company would need to sell as many as 700 stores to gain antitrust approval. Still, the result would be about 20,000 locations, making it the nation's largest retail chain in terms of locations.

Currently, Dollar General is the largest dollar store chain, followed by Family Dollar and Dollar Tree. 

Dollar General tops Walmart in pricing survey

Dollar General topped Kantar Retail's annual opening price point survey for the second year in a row, narrowly beating Walmart. The survey "determines how select retailers meet the grocery and consumables needs of shoppers looking for the lowest shelf prices."

According to Kantar, Dollar General's total basket was 12 cents less than Walmart's. On the other hand, Target's basket was 48% more than Dollar General's, which put the mega retailer in last place, just ahead of Aldi.

Walgreen's was left out of the survey this year, as Kantar said their opening price point was not competitive. The data was collected in southern New Hampshire and northern Massachusetts.

Dollar General to test fuel station

Dollar General announced last week that it will "test pilot" a fuel station at one of their stores in Hanceville, AL. The test is a joint venture with Mansfield Oil, and the companies will jointly evaluate the results.

According to Dollar General CEO Rick Dreiling, the project "is consistent with our strategy of continually looking for new and better ways to meet our customers' needs for value and convenience, and enhancing our position as America's general store."

Yes, he called Dollar General "America's general store."

Dollar Tree reports sales increase; won't add tobacco

Dollar Tree announced last week that its net earnings improved by 10.2% in the fourth quarter as compared to the same period a year ago. A 15.4% sales increase was a major factor, along with a slight improvement in margins and an extra week in the quarter. Comparable-store sales for the quarter increased 2.4%.

In addition, Dollar Tree announced that unlike Dollar General and Family Dollar, it would not roll out tobacco in its stores. Instead the company will add frozen and refrigerated foods to another 475 stores in 2013.

For the full fiscal year that ended on February 2, Dollar Tree's sales improved 11.5% to $7.4 billion, and net income increased 8.4% to $619.3 million.

National chain expansion hits five-year high

According to a report issued by RBC Capital Markets, demand for retail space in the U.S. hit a five-year peak at the end of 2012, with nearly 82,000 stores scheduled to open within two years. According to Analyst Rich Moore, many of the chains with expansion plans are national retailers looking to fill small shop spaces in open-air community and power centers.

The reports says that the retailers planning the most new stores are Subway, Dollar General, Five Guys and Family Dollar, in that order.