Dollar stores eyeing bigger helping of food

With consumables a steady sales driver, Dollar General Corp. and Dollar Tree Inc. are both pushing ahead with plans to bolster their food and beverage offerings.

Goodlettsville, Tenn.-based Dollar General saw consumables sales rise 10.6% to $4.77 billion for its fiscal 2018 first quarter ended May 4. In reporting quarterly results yesterday, the company said this growth helped fuel a 9% gain in total sales to $6.1 billion and lift same-store sales by 2.1%.

“We recently launched a better-for-you offering intended to provide our customers with healthier consumable options at affordable prices. Over time, we expect this offering to include more than 130 products,” CEO Todd Vasos told analysts in a conference call Thursday.

In tandem with that effort, Dollar General is rolling out Good & Smart, a new private label that Vasos said will represent about 75% of the better-for-you product portfolio. “Our goal is to build Good & Smart into a unique private brand that becomes a go-to product line for our customers when they look for good food choices at smart prices,” he said.

Accommodating more consumables in stores is another strategic focus. In upgrading its store base, Dollar General plans to focus on remodeling locations with fewer than 12 cooler doors.

“These store remodels typically drive amongst the highest returns,” Vasos said. “By the end of fiscal 2018, we anticipate that across our store base we will have an average of 20 cooler doors, up from 10 in 2012.” The retailer had installed nearly 7,000 more cooler doors across its mature store base by the end of the first quarter, and it aims to install over 20,000 more cooler doors this year. “We know the expansion of coolers tends to drive trips and basket size. As a result, we expect to build on our multiyear track record of growth in cooler doors and associated sales.”

In fiscal 2018, Dollar General plans to open 900 new stores, remodel 1,000 mature stores and relocate about 100 stores. About 400 of the 1,000 planned remodels will be to the Dollar General Traditional Plus format (DGTP). “This format has a higher cooler count that can accommodate more perishable items,” Vasos said.

The DGTP format accounted for 125 of the first-quarter store remodels, which added a fresh produce section in 45 locations. Outside its larger Market format stores, Dollar General now offers produce in more than 200 stores and aims to bring that category to more locations, according to Vasos.

“We've got a lot of track record, because of our Market stores, on how to treat produce within our stores,” he said during the call. “We're still learning in our smaller store formats. But we see it as a competitive advantage, especially in rural areas where there isn't a lot of competition and/or food choices — especially healthy food choices — for our core consumers.

“I would tell you it's not going to be for every store, somewhere down line, but could it be for thousands eventually? Yes, it could,” Vasos added.

Dollar General finished the first quarter with 14,761 stores in 44 states, up from 13,601 a year earlier.

Dollar Tree’s Snack Zone

Meanwhile, Chesapeake, Va.-based Dollar Tree is expanding its Snack Zone concept, which President and CEO Gary Philbin reported has drawn a strong response from shoppers.

The chain added the Snack Zone to 214 Dollar Tree stores in the first quarter, which ended May 5, and it plans to bring the concept to 750 Dollar Tree stores in fiscal 2018.

“Over the past year, the Dollar Tree merchant team has developed and tested an initiative for select stores, which we call Snack Zone. The Snack Zone is designed to provide customers with a compelling assortment of immediate consumption products at the dollar price point to drive incremental sales,” Philbin said in a call with analysts.

“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 that they crave,” he explained. “We're excited about these incremental sales and additional foot traffic that they generate in the stores where installed.”

For the first quarter, Dollar Tree’s overall sales rose 5% to $5.55 billion. Revenue increased 8.3% to $2.78 billion at Dollar Tree stores and edged up 2% to nearly $2.77 billion and Family Dollar stores. However, same-store sales grew 4% at Dollar Tree and dipped 1.1% at Family Dollar.

“In our Dollar Tree banner for the first quarter, our top-performing categories were candy, snacks and beverage, beauty and eyewear, health and personal care and household consumables. Our sales performance was very balanced, with discretionary slightly outperforming consumables,” Philbin told analysts.

At Family Dollar, top-performing categories included refrigerated and frozen foods, school and office supplies, snacks and beverages. “Our comp performance was again driven by consumables,” said Philbin. “I'm pleased with our progress across these categories, as it speaks to the relevance and items that our customers need most and count on Family Dollar to deliver weekly.”

Consumables have been a focus in Family Dollar store remodels. The company completed 215 Family Dollar renovations in the first quarter, bringing the total to 592. Philbin said the initial results in the remodeled locations are encouraging.

“The renovated stores provide our customers with a better Family Dollar shopping experience: better shopping adjacencies and more productive, meaningful endcaps; expanded beverage and snacks, including immediate consumption coolers near checkout; added assortment of food in coolers and freezers; updated hair care assortment; expanded adult beverages in select stores; our shopper-friendly power alley to emphasize Dollar WOW! Items; and a faster checkout process for the customer,” he said in the call. “Our store teams are working hard to be the neighborhood store of choice for the fill-in shopping needs of our Family Dollar customers that typically live, work and shop near our stores.”

Overall, Dollar Tree opened 130 stores and expanded or relocated 26 stores in the first quarter. It closed out the period with 14,957 stores (6,716 Dollar Tree and 8,241 Family Dollar), up from 14,482 (6,444 Dollar Tree and 8,038 Family Dollar) a year ago.