Dollar General Markets in California Push

GOODLETTSVILLE, Tenn. — Dollar General here said its Dollar General Market format would be a “significant part of its initial California strategy” as it seeks to grow in that state.

In a conference call with analysts discussing fourth-quarter results, the company said it was “pleased with the preliminary results” from new and remodeled locations of the Market format, which offers a full grocery shop and resembles a price-impact supermarket with an emphasis on freshness in the perishables area and low prices throughout the store. The company ended 2011 with 69 Dollar General Markets, including 25 stores that were remodeled during the year and another 12 that the company opened, including seven in the Las Vegas area.

Late last month Dollar General opened its 10,000th location, a Dollar General Market in Merced, Calif.

“This is our fifth store in the state and we expect to have 50 stores in California by year-end,” said Richard Dreiling, chairman, president and chief executive officer, Dollar General.

The California stores, along with locations in Nevada, Arizona and New Mexico, will be supplied by a new distribution center near Bakersfield, Calif., beginning this month, he said.

For the 14-week fiscal fourth quarter, which ended Feb. 3 and included an extra week, Dollar General said net income totaled $293 million, up about 31.4% over year-ago levels. Sales were up 20.1%, to $4.19 billion.

Same-store sales rose 6.5% for the comparable 13-week period, and included increases in both transaction size and traffic counts. In recent weeks, Dollar General said traffic increases have accounted for more of the sales growth than basket size, although the company did not disclose specific details.

For the 53-week year, net income totaled $767 million, up 22.1% over the preceding, 52-week year. Sales were up 13.6% to $14.81 billion, and same-store sales rose 6%.

For 2012, the company projects same-store sales growth of 3% to 5%.

“We believe that [Dollar General] can out-comp most competitors this year as share is taken,” said John Heinbockel, an analyst with Guggenheim Securities, in a research note.