Dollar General’s self-checkout exit is bigger than expected

Dollar General executives admitted during an earnings call last week that shrink during the first quarter of 2024 was a little higher than expected. Still, the discount retailer continues to make progress in this area, mostly via tweaks to self-checkout.
 
The retailer had already converted 9,000 stores away from self-checkout with the intention of  preventing theft, and in May an additional 3,000 locations were stripped of their self-checkout lanes.
 
“While this represents a significant change in our stores, we believe this is the right course of action to drive increased customer engagement, while also better positioning us to begin reducing shrink in the back half of 2024 with a more material positive impact expected in 2025,” Dollar General CEO Todd Vasos said during the call on Thursday. “Moving forward, we plan to have self-checkout options available in a limited number of stores, most of which are higher volume and low-shrink locations.”
 
Vasos added that it was customer feedback which prompted the company to pull the additional 3,000 self-checkout stations. Customerfeedback indicated that shoppers prefer that checkout have a front of store worker present.
 
Dollar General also reduced its inventory at an aggressive pace during the first quarter in light of rising sales. Vasos said there was a 9.5% reduction in per store inventory and a 22.5% reduction in non-consumables and discretionary business.
 
Kelly Dilts, executive vice president and CFO at Dollar General, said the focus would continue to be on per-store inventory, which means there will be more inventory optimization using technology.
 
“We are really looking at how to right-size the inventory over the next 12 to 18 months from just what we’re carrying in the stores and making sure that we are in a better position to serve our customers from an in-stock level,” Dilts said during the earnings call.
 
Chain of events

Dollar General’s top priority within supply chain is to improve rates of on-time and in-full truck deliveries (OTIF). The company’s OTIF levels were higher in the first quarter of 2024 than a year ago, according to Vasos.
 
The discount retailer said it also identified an opportunity to close12 temporary warehouse facilities which would help lower cost and improve inventory flow throughout the supply chain.

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To date, Dollar General has closed seven of the 12 facilities and will close the other five before the end of the year.
 
In conjunction with the moves, Dollar General continues to make great progress with its permanent distribution centers in Arkansas and Colorado, and both are scheduled to open later this year.
 
The discount retailer also has begun the first full-scale refresh of its sorting process within the distribution centers. Work has begun at all 18 of the dry facilities, and four have been completed.
 
“Once we conclude the restore process, we believe our store teams will be able to restock shelves more quickly,” said Vasos.
 
During the call, Dollar General said it has also committed to a net reduction of up to 1,000 SKUs by the end of 2024.

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