Dollar General encouraged by DG Fresh rollout

With the addition of new distribution facilities in the past quarter, Dollar General Corp.’s self-distributed DG Fresh initiative is now in 3,500 stores and should be in nearly a third of its store base, or 5,000 locations, by the end of 2019, executives said Thursday.

“We are very excited about the early results we are seeing from this initiative as well as the long-term potential benefits it can deliver for our customers and our business,” said Todd Vasos, Dollar General CEO, in a second-quarter earnings call. “We continue to believe it can be accretive as early as 2020.”

The Goodlettsville, Tenn.-based deep-discount brand also announced two management promotions effective Aug. 27. 

Jeffery Owen, 49, was promoted to chief operating officer with responsibility for store operations, merchandising and supply chain. Owen had served as executive vice president of store operations since June 2015, and will be succeeded in that role by Steven Sunderland, who joined Dollar General in September 2014 as senior vice president of store operations.

The DG Fresh rollout, which began in January, is aimed at improving margins and closing the gap between Dollar General’s dry goods and its fresh products.

“We have historically seen about a 10-point gap in our in-stock levels between our dry goods and our fresh products,” Vasos said. “We believe we can close the gap with DG Fresh, which is supported by results from the early phases of our rollout.”

Related:More food in the mix at Dollar General

DG Fresh also allows a wider selection of both national and private brands and enhanced offerings in its Better For You offerings, he said. Produce is not included in the initial rollout plans, Vasos added, “we believe DG Fresh could provide a potential path forward to expanding our produce offerings to more stores in the future.”

Dollar General began shipping from its first DG Fresh distribution facility in Pottsville, Pa., in January and has added two facilities in Clayton, N.C., and Atlanta. A fourth DG Fresh distribution facility in Westville, Ind., is scheduled to open in the next few weeks, Vasos said.

“In total, we are now self-distributing to more than 3,500 stores,” he said, which is an increase of about 2,700 stores from the end of the first quarter. With the Indiana facility set to come on line, he said the company should have DG Fresh in its earlier announced 5,000-store target by year’s end.

Vasos said the company is expanding coolers in new and remodeled stores.

“We began our cooler expansion efforts in earnest in 2013,” he said. “And we continue to believe we have ample runway with this important program.” During the first half of this year, the company added more than 20,000 cooler doors across the store base and expects to install more than 40,000 cooler doors for the entire year.

The cooler expansion has provided a foundation for the DG Fresh initiative, he added. The company has begun installing higher capacity coolers, which hold 45% more than those of the past, into the company’s real estate program, he said. The higher capacity coolers will be included in the majority of remodeled and relocated stores as well as new locations.

Dollar General is also leaning into digital initiatives to drive traffic and increase basket size, Vasos said. Digital customers check out with baskets twice as large as the company average, he added.

The company recently introduced a new “shopping list” feature to the Dollar General mobile app. “This tool not only allows customers to build and save shopping lists but makes it even easier for them to save money through digital coupon push notifications and comparable private-brand product suggestions,” Vasos said.

In addition, DG Go mobile checkout is available in more than 250 stores, Vasos said, and that feature will be incorporated into the overall Dollar General mobile app in the third quarter so customers will have an increased “frictionless” shopping experience.

For the second quarter ended Aug. 2, Dollar General reported net income rose 4.7% to $426.6 million, or $1.65 a share, from $407.2 million, or $1.52 a share, in the same period last year. Sales rose 8.4% to $6.981 billion from $6.443 billion in the prior-year quarter.

As of Aug. 2, Dollar General operated 15,836 stores in 44 states.

Contact Ron Ruggless at [email protected]

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