The boom times may be over for Dollar General, which has been a major beneficiary during the Covid-19 pandemic as shoppers have sought out low-cost groceries and other household staples.
The discount chain, which is coming off a banner 2020, warned on Thursday that sales could decline this year as more people become vaccinated, the economy reopens and stimulus checks dry up. Last year sales climbed nearly 22% to $33.7 billion. Shares fell 5% in morning trading.
Chief Financial Officer John Garratt said he is not counting on a boost from the latest round of $1,400 stimulus checks, which began going out to low- and middle-income Americans this week.
“We are competing with other segments of the economy outside of retail for that share of wallet,” Garratt said on a call with analysts and investors, indicating that this money may increasingly be going toward dining, entertainment and travel. Garratt also noted survey results that indicate consumers expect to save more of their latest stimulus checks than in previous rounds.
Like many essential retailers, Dollar General benefited last year when shoppers hurried to stores and frantically cleared shelves of toilet paper, cleaning supplies and other necessities. However, now it faces a tough time beating that performance while facing significant uncertainty about what the year ahead looks like.
Dollar General is forecasting that sales at existing stores will decline between 4% and 6% compared to 2020, though said the picture brightens when compared to 2019, in which case sales would grow in the low double digits. Rival Dollar Tree chose not to provide guidance when it reported earnings earlier this month.
“We believe the fundamentals of the business are strong, and we are confident in the team’s ability to execute on our robust plans for 2021,” said Garratt.
The company has been expanding aggressively in recent years and has plans to introduce another 1,050 new locations this year, which would bring its footprint to above 18,000 stores. It also plans to remodel 1,750 of its outlets and relocate another 100.
These new and remodeled stores will all include fridges stocked with items like milk, juice and eggs as part of a broad push to offer basic grocery items. It also plans to bring produce to more than 700 stores this year, bringing the total number of stores with fruit and vegetables to 1,800.
These fridges, plus its presence in rural and underserved areas, could make it a prime candidate to help with the vaccine rollout. Dollar General has been in talks with the Centers for Disease Control and Prevention about a potential partnership, according to a spokesperson, who said the company remains ready to help how and where appropriate.
Meanwhile, it continues to test a new store design called Popshelf, which targets higher-income consumers and features home decor, beauty items, party goods, cleaning supplies and more, typically for $5 or less. It is going after women with household incomes of $75,000 and up, compared to the $35,000 to $40,000 that its core customer earns.
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March 18, 2021 at 10:44PM
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Dollar General Says Boom Times Are Over As Vaccine Rollout Gains Ground - Forbes
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