New Dollar General prototype will emphasize fresh

Dollar General is at work on a new store prototype that will provide a faster checkout for shoppers and an increased fresh foods and health-and-beauty presence, CEO Todd Vasos said Wednesday.

The new store will be rolled out to all new locations and remodels beginning next year, Vasos told analysts while reviewing quarterly financial results.

“The format will allow for a more customer-friendly shopping experience,” Vasos said. “In this prototype, the consumer will be able to and have faster, more convenient checkout, an attribute that is a high priority for our core consumer.”

Vasos said the new stores would also increase cooler penetration, saying that customers that rely on Dollar General for fill-in food trips tend to buy more overall.

“We have a significant opportunity to increase our cooler penetration across our store base,” he said. “Perishables drive trips and basket size with our consumer as she looks for a quick meal solution or a fill-in item. Across the chain, a basket with a perishable item is nearly 50% higher than the chain average. This is a big opportunity that we know how to capitalize on, as we have already increased the cooler count on average by just over 50% since 2008.”

Vasos also said the company would look to expand offerings in areas like hair care, cough-and-cold, skin care and nail care because “more and more consumers looking to DG for her health and beauty needs.”

Quarterly sales for the Goodlettsville, Tenn., company came in lower than expected, in part due to unusually rainy weather in parts of the country during the month of June, Vasos said.

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Comparable-store sales for the second quarter ending July 31 improved by 2.8%, lower than the 3.6% figure expected by analysts. Overall sales improved 7.9% to $5.1 billion, reflecting higher store traffic and average ticket. Operating profit improved by 11% as gross margins as a percent of sales increased by 36 basis points to 31.2%. Net income of $282.3 million improved by 12.3% and earnings-per-share beat Wall Street consensus by a penny.

Vasos said sales slowed during June but rebounded again in July.

“When we look at our sales, it really did mirror what the nation saw at retail out there,” he said. “What we saw was once we got through the month of June and into July, the weather patterns normalized, the heat returned, and those torrential rains in Texas and Oklahoma and other areas subsided.”

While the company reiterated guidance for full-year comps in the range of 3% to 3.5%, Vasos said he expects the June blip would lead to results near the low end of the range. Analysts expect 3.3% comps.