DOLLAR GENERAL EYES ADDING MORE COOLERS

MARK HAMSTRA

GOODLETTSVILLE, Tenn. - Dollar General here said it might have the opportunity to increase its perishables offering in some of its stores.

"We still see opportunities in some stores to expand the cooler penetration," said David Purdue, chairman and chief executive officer, Dollar General, in a conference call discussing the company's first-quarter results. "We're seeing that some stores have an appetite for deeper penetration from this cooler effort."

The company is also working aggressively on pricing in its grocery and perishables offering, he said.

"We're actively looking at commodity pricing," he said. "For example, milk varies in pricing by region, and we're looking at doing some things there to be even more competitive."

He did not elaborate on any specific plans for pricing initiatives, although he did say that he saw private label as an opportunity to provide more "entry-level price points."

"We believe our private-label program is greatly under-leveraged," he said.

Although the company has added more national name-brand groceries to the mix, displacing some off-brands, it is still seeking to offer the lowest price in the market on many of its offerings.

Dollar General also ran its first circular promotion in conjunction with the Easter holiday this year, which included national, name-brand consumables and seasonal offerings.

For the 13-week quarter that ended May 5, the company said strong sales of highly consumable items, which carry lower margins, contributed to a decline in profitability. Shrink also played a role.

Net income for the period fell about 26.5% to $47.7 million, on a sales increase of 8.8% to $2.15 billion, compared with year-ago results, the company said. Same-store sales rose 1.6%.

The sales increase was primarily due to the opening of 527 new stores since the end of the year-ago first quarter.

Other factors impacting profitability in the quarter included an increase in markdowns and lower sales in the company's higher-margin categories, including home products and basic clothing. Sales of highly consumable items rose 10.2%.