Dollar General is 'leaning hard' into $1 items, private label

Dollar General executives on Thursday said they were disappointed with fourth-quarter sales results, despite gaining market share in both food and beverage, as well as non-consumable goods.

But the Goodlettsville, Tennessee-based retailer said it continued to see wealthier shoppers coming through the doors, seeking value-priced items, as it increased its offerings of frozen and refrigerated foods, and private-label items.  

For the quarter ended Feb. 3, Dollar General reported same-store sales growth of 5.7%. Same-store sales increased 4.3% for the fiscal year. Fourth-quarter operating profit increased 17.1%, to $993.2 million, while full-year operating profit grew 3.3%, to $3.3 billion, the retailer said.

Same-store sales were largely driven by inflation, with a significant decrease in traffic in December. The retailer blamed that drop off on the impact of winter storm Elliott.

Dollar General shoppers during the quarter were very much focused on value. Products that retail for $1 or less, part of the company’s Value Valley set, posted same-store sales growth of more than 30%.

“We are still leaning hard into our dollar price point,” Dollar General CEO Jeff Owen told analysts, according to a transcript from financial services site Sentieo. “And we’re there for that customer.”

That same consumer is also shifting to more private brands and to food and beverage, as opposed to discretionary items, Owen said.

“It’s primarily due to food inflation,” he noted. “And obviously, as you think about how that changes her behaviors, one of the things we’re seeing is she’s relying more on savings, credit cards and also borrowing money, quite frankly, from friends. And as that shows up in the store, what we’re seeing in the shopping behavior is that translates into our customer coming more often, she’s buying fewer items on occasion.”

Private label currently makes up more than 20% of total sales at Dollar General.

“Within consumables, private brand growth, both in absolute dollars and penetration, was the highest in the fourth quarter,” Owen noted.

This year, Dollar General intends to increase private-label products across departments including candy and snacks, perishables, pet food and over-the-counter health care products.

The retailer continues to expand its DG Fresh initiative, saying it now self-distributes perishable products to its more than 19,000 stores from 12 facilities around the country. Fresh produce is now sold at more than 3,200 locations, with plans to expand it to a total of more than 5,000 stores by the end of the year.

“We continue to be pleased with the cost savings from this initiative and, importantly, the significantly enhanced profitability of our perishables offering,” Owen said. “In addition to capturing cost savings, DG Fresh also aims to increase sales in frozen and refrigerated categories. We are pleased with the performance on this front, including enhanced product offerings in stores and strong performance from our perishables department, which had our strongest rate of comp sales growth during 2022.”