Dreiling Brings Range of Expertise to Dollar General

MARK HAMSTRA

Name: RICHARD DREILING

Title: Chief executive officer, Dollar General

Biggest challenge: Executing a turnaround on a widespread scale.

GOODLETTSVILLE, Tenn. — The high-speed race of dollar-store expansion has stalled somewhat, but Dollar General, based here, has found what it hopes will be a fresh spark plug for its engine.

Richard Dreiling, a longtime Safeway veteran who in the last few years launched turnarounds at Longs Drug Stores Corp. in California and the Duane Reade drug store chain in New York, has been asked to do the same at one of the nation's largest retail chains. Named chief executive officer of Dollar General in January, Dreiling takes over the 8,200-store network of Dollar General locations in the midst of a turnaround.

“It's an exciting move, because as pressure continues to grow on formats and format definition, dollar stores are going to become increasingly important,” said Ted Zittell, a partner in consulting firm McMillan Doolittle, Chicago, and principal of Ted Zittell & Associates, Toronto. “His experience in full-size formats and in smaller multi-category formats at Longs and at Duane Reade is going to be very beneficial to planning the optimal assortments and negotiating with suppliers to get the programs that are needed.”

Private-equity giant Kohlberg Kravis Roberts took Dollar General private last year amid a slowdown in the chain's performance. Former CEO David A. Perdue resigned, and Dreiling was named to take over about six months later.

Dreiling, 54, spent 33 years at Safeway in various executive positions, including executive vice president of marketing, manufacturing and distribution and, before that, as president of the Vons division in Southern California. He was with Safeway when KKR owned the chain.

A KKR spokesman declined to comment to SN for this article. In a prepared statement, Mike Calbert, a KKR member and Dollar General's chairman, said Dreiling “ranks among the retail industry's outstanding executives, and he has a long and successful track record. He brings to Dollar General extensive retail experience and expertise in store operations, merchandising, marketing and distribution.

“He believes in the brand and understands what it means to our customers, and he will ensure we maintain the business and financial discipline necessary to take Dollar General to the next level.”

Dreiling also declined to comment for this article.

Analysts said Dreiling executed a merchandising turnaround in his most recent position as president and CEO of Duane Reade, the 240-unit, high-volume chain of drug stores based in New York City.

Carla Casella, a debt-side analyst at JP Morgan, New York, who follows both Duane Reade and Dollar General, said Dreiling's challenge in his new position is similar to the one he faced at Duane Reade — but on a much larger scale.

“I think Dollar General has a lot of the same challenges,” she told SN. “The stores don't always look that great, and they are not consistent.”

At Duane Reade, Dreiling oversaw a merchandising revamp in which stores were remodeled to convey more of a “lifestyle” image, and cluttered windows displaying rows and rows of product were instead filled with colorful signs that also helped convey the “lifestyle” theme.

Under his tenure, the chain added more convenience items, including more convenience foods, which helped drive double-digit percentage gains in same-store sales of front-end (non-pharmacy) products during the past two years, the company said in its most recent quarterly conference call with analysts in November.

“They renovated the stores, and they changed the way the racking is set up to reduce shrink, and they changed the merchandise a bit,” explained Casella. “They brought in some more private label, and they brought in some more higher-end things, like some gourmet chocolate I recently saw at one store.”

Casella said she believes Dreiling is a “good leader” who communicates well.

“He makes things a team project, and I think he means it,” she said.

She recalled one incident that underscored his attentiveness: During an analysts' tour of a Duane Reade store about two years ago, Casella, who was on maternity leave at the time but went on the tour with her infant son, said her baby dropped his pacifier on the floor.

“Rick saw that out of the corner of his eye, and a couple of aisles later, a woman who worked in the store gave me a new pacifier that she had taken off the shelf, unwrapped and washed, because he had told her to give me a new pacifier,” Casella explained. “It was very cute. He is very attentive, and is just a very personable guy.”

Analysts also give Dreiling credit for changes he implemented at Longs Drug Stores, where he became executive vice president and chief operating officer after leaving Safeway in 2003.

“At Longs, he did a lot of the heavy lifting early in the turnaround,” said Andrew Wolf, an analyst at BB&T Capital Markets, Richmond, Va., who follows Longs. “He did many of the same things he had done at Safeway — a lot of very nuts-and-bolts operational-oriented activities, like labor management, distribution, merchandising — a pretty broad swath of activities.”

Even though Dreiling only stayed a short time at Longs, he is still given credit for putting in motion much of the chain's ongoing turnaround, Wolf said.

“They took their operating margin up from below 2% to 3½%, and they did a lot with distribution systems, and working with store management to make it more efficient,” Wolf said. “A lot of this was installing systems and processes to really drive big cost savings and organizational efficiency.”

His projects at Longs included centralizing distribution and buying, cutting shrink and trimming labor costs.

Zittell of McMillan Doolittle said Dreiling's diversity of experience should be an asset to Dollar General.

“He has been involved in marketing and merchandising, as well as supply chain and manufacturing, so he has good end-to-end experience,” he said. “He is energetic, experienced and quite a hands-on guy.”

When Dollar General last year announced its intention to be acquired by KKR, it had already launched a restructuring initiative that included plans to close 400 locations and to slow the pace of new-store openings. Analysts told SN at the time that being private would buy the company more time to implement a long-term restructuring plan without pressure from Wall Street to show quarterly gains.

“Dollar General has made excellent progress in recent months, and I believe there are exciting opportunities to extend the company's record of innovation in the small-box discounting segment,” said Dreiling in a statement announcing his hiring. “I look forward to joining the Dollar General team and will work aggressively to enhance the brand and strengthen the company's position as a leader in serving cost-conscious shoppers who value convenience.”