DOLLAR GENERAL PLANS MORE PROMOTIONAL CAMPAIGNS IN '06

MARK HAMSTRA

GOODLETTSVILLE, Tenn. - Dollar General here said last week that it would alter its marketing approach in 2006 and that it would also "add more dominant brands in packaged foods and condiments."

In a conference call discussing its year-end results, the company said it would execute more seasonal promotions and would consider consolidating promotions for multiple new store openings. It also said it is testing a new prototype that it said would call more attention to national brands and improve product adjacencies.

It is still planning to open about 30 Dollar General Markets in 2006, as previously reported, and 800 new stores in total. David Purdue, chairman and chief executive officer, said the company was encouraged by the performance of the grocery-and-general-merchandise concept, and added that the company was experimenting with some variations in the size of the store, although he did not elaborate.

"I'm not ready to tell you that we're going to stop opening traditional stores and open DG Markets, but I'm very pleased with it," he said.

The company has 44 of the stores, which average about 17,400 square feet and carry perishable, frozen and dry food products.

In terms of the layout changes at traditional stores, Purdue said the company was doubling its offering in the cleaning products and paper products categories, and adding more endcaps for national grocery brands to create more exposure.

"We have great brands in our stores, but don't generally get credit for it when we talk to our customers in market research," Purdue said.

He also said the company was revamping its promotional strategy with more circulars around the holidays.

"We plan to focus more energy around holiday events when traffic is traditionally heavier," he said.

Asked by an analyst about whether this new promotional effort would detract from its everyday low price strategy, the company said it was committed to EDLP on most merchandise.

He said Dollar General typically suffers a decline in traffic during certain times of the year because of heavy promotional spending by rivals, and he hopes to curtail that by developing more promotions on limited-time offerings at these times, such as back-to-school season.

For the fourth quarter that ended Feb. 3, which included one extra week, the company posted an increase of about 7.8% in net income, to $145.3 million, on a 12.9% gain in sales, to $2.48 billion, but same-store sales for the period fell 1.6%. Same-store sales were reported on a comparable-time basis, excluding the extra week.

For the year, which also included an extra week, net income was up 1.7%, to $350.2 million, on a sales gain of 12%, to $8.58 billion.