DOLLAR GENERAL TO ADD 20 MARKET STORES IN 2004

MARK HAMSTRA

GOODLETTSVILLE, Tenn. -- Dollar General here last week said it planned to add 20 of its test-stage discount grocery stores next year, and expand its refrigerated and frozen offerings throughout its entire chain by 2005.

Speaking at the company's annual conference for financial analysts, Lawrence V. Jackson, president and chief operating officer, Dollar General, also said the company planned to open 675 new conventional Dollar General stores next year, adding to its current tally of 6,653. The stores offer discount prices on a variety of general merchandise and grocery items.

The new grocery stores, called Dollar General Market, have been in test since June, when the company opened the first prototype location in Hendersonville, Tenn. A second test store opened earlier this month in Pleasant View, Tenn.

The stores have about 17,000 square feet of selling space, and offer an expanded array of bargain-priced dry groceries and perishables, including about 20 stockkeeping units of produce and about 50 doors of refrigerated and frozen merchandise. The Market stores also offer appliances, craft and hobby items, magazines and home-entertainment products like CDs and DVDs.

Analysts who toured one of the test stores as part of the meeting said shoppers seemed to be using the outlets primarily as a food store.

"There was a lot of traffic, and most of the purchases seemed to be grocery-type items," said Mark Mendel, an analyst with Blaylock & Partners, New York.

He said the company spent about $600,000 refurbishing the test site that he toured, which previously had been a small supermarket.

A spokeswoman for Dollar General declined to disclose specifics about store volume or sales mix. She also declined to disclose planned locations for the Market stores, which another analyst described as being like a "mini-Wal-Mart."

Dollar General also said it planned to add as many refrigerated coolers -- stocked with items like milk, eggs, cheese and frozen items -- to its traditional stores as it can next year, with the rest to be completed in 2005.