Dollar General will build larger stores and expand the Popshelf brand

Dollar General is doubling the physical market by building larger stores and expanding Popshelf, a new chain targeting higher-income suburban customers.

On Thursday, the discounter made aggressive plans for the fiscal year calling for the company to open 1,050 stores, remodel 1,750 locations and relocate 100 more.

As it builds new stores, shoppers will see bigger sales floors and more merchandise. They’ll also notice more branding for Popshelf, which the retailer debuted in the fall. The company tests new locations as well as the brand it uses to create a store within a store.

Sales of grocery and household supplies helped fuel Dollar General’s sales growth during the pandemic as consumers cooked more at home and watched their budgets during a period of economic uncertainty. Sales in the same store increased by 16.3% in the financial year.

In recent months, however, the share of pandemic beneficiaries – including Dollar General – has fallen as investors bet Americans will spend their dollars on dining out and traveling once vaccinated. During a profit call on Thursday, Dollar General Todd Vasos argued that investors should continue to bet on the company. He said the retailer can increase profits by increasing its footprint, selling more non-consumable items at higher margins than food, and appealing to a wider range of customers.

Chief Operating Officer Jeff Owen said the retailer estimates it could add as many as 17,000 stores across the country – a move that would roughly double its footprint.

“Overall, our real estate pipeline remains robust and we are pleased with the significant new retail opportunities ahead,” he said.

As Dollar General adds, renovates and relocates stores, Owen said, it will increase the square footage of its sales floor to make more room for produce and fresh meat coolers, a wider range of health and beauty products, and additional checkout counters.

Vasos said Dollar General tested the larger store sizes in 2020 and found they outperformed the rest of the chain with higher sales. It already has some larger stores with a wider range of food and general merchandise.

Dollar General also plans to build 50 Popshelf stores by the end of the fiscal year, more than its original target of 30, Owen said.

The retailer opened its first two Popshelf stores near Nashville, Tennessee in the fall. Popshelf sells home accessories, beauty supplies, cleaning supplies, and party supplies, with nearly all items costing $ 5 or less. The target customer has an annual household income ranging from $ 50,000 to $ 125,000 – higher than the annual household income of $ 35,000 to $ 40,000 of a typical Dollar General customer, the company said.

Owen said the Popshelf stores “provide a fun, affordable, and differentiated scavenger hunt experience through constantly renewed merchandise.” He said the company is looking to expand its current 5 stores faster than planned because of the results it saw.

Dollar General will start a pilot combining its eponymous brand and Popshelf, he said. At 25 stores, customers will see signs for both labels at the entrance. Inside, Popshelf will feature prominently downtown as a store-in-store, he said.

The tests will focus on areas where customer demographics are somewhere between Dollar General and Popshelf – with household incomes ranging from $ 50,000 to $ 75,000, Vasos said.

“If it works – and we think it will – there could be a few more to be done in 2022 and a lot more as we move forward,” he said.

Shares of the company are up about 21% in the last year, at close on Wednesday. They were down less than 5% on Thursday afternoon. Previously, the company posted fourth-quarter profits that fell short of estimates, and projected same-store sales would decline 4% to 6% in the next fiscal year, compared to the unusually high sales levels caused by the pandemic. Looking over a two-year period, Dollar General’s forecast implies 10% to 12% annual sales increases in the same store.