Rick Dreiling

Shortly after being named chief executive officer at Dollar General in January 2008, Rick Dreiling described the company as being guilty of “aggressive store expansion without operating discipline.”

After experiencing a $12.8 million net income loss on almost $9.5 billion in sales during fiscal 2007, the nation’s largest discount retailer was hardly on the ropes. In fourth-quarter 2006, the Goodlettsville, Tenn., company had launched a strategic initiative called Project Alpha to improve store merchandising primarily by addressing the company’s inventory packaway model. This model essentially involved keeping most non-perishable products at stores indefinitely, until the items eventually sold, or were damaged or discarded.

Safeway veteran Dreiling, off of successful turnaround efforts at drug store chains Duane Reade in New York and Longs Drug Stores in California, was tapped to help the chain maximize its potential following a $6.9 billion buyout by Kohlberg Kravis Roberts in 2007. Under Dreiling’s leadership last year, Dollar General made significant strides toward boosting traffic and sales per square foot, increasing sales of consumable products, reducing inventory shrink and improving efficiencies in the chain’s distribution system.

In his first year at the helm, net income at the chain topped $100 million on $10.5 billion in sales, with same-store sales up 9% compared with 2007. In the first quarter of 2009, same-store sales were up again — more than 13%.

“We are intently focused on improving store standards,” Dreiling said during a May 2008 conference call with analysts. “In the first quarter we instituted a model store program to demonstrate what a Dollar General store should be — bright, clean, well-stocked, properly merchandised and reflective of the new Dollar General standards.”

Going forward, Dollar General remains focused on four priorities that have been keys to its recent success: driving sales growth, partly by improving merchandising and boosting traffic with more consumable products; increasing gross margins by reducing shrink, improving sourcing, and enhancing the chain’s private-label offering; keeping expenses down through process improvements and information technology; and strengthening the company’s culture. As Dreiling noted during the conference call, turnover among store managers was at its lowest level in 10 years in 2008.

— Matthew Enis