Dollar General Flexes Its Employment Muscles, with a Wink at Walmart
Dollar General (DG) looks to be usurping Walmart's place as the retailer that looks after the American working class.
Of course, the Walmart (WMT) mission statement says it saves people money so they can live better, and, in truth, it remains focused on bringing prices down to a level that makes a wide range of products available to more consumers in the United States and in other countries where it operates. Price wars it has threatened and launched have led to laptop computers breaking the $300 barrier, and lately, leading up to the Super Bowl, it has hammered the cost associated with HDTVs.
Yet, the company also has laid off over 11,000 workers during the past couple of weeks, including 10,000 or so product demonstrators at Sam's Club, leaving the employment prospects for many of them sparse.
Amidst the whirl of activity at Walmart, Dollar General announced that that it would add about 5,000 new jobs this year to support the planned opening of 600 new stores over the next 12 months. The retailer further pointed out that it had created 4,000 new jobs in 2009. The numbers are pretty impressive considering the state of the economy, and the company tops it all off by pointing out that it is the largest retailer in the United States by store count, exceeding not only Walmart but drug chains such as Walgreens that are not only extensive but aggressively expanding.
Like many dollar store operations, Dollar General has typically taken a low key approach to the market, quietly adding stores and expanding operations in categories such as food that have drawn consumers in the economic downturn.
Yet, Dollar General seems ready for a coming out party.
In the third quarter, reported on Dec. 10, Dollar General posted a profit of 24 cents per share versus a loss of two cents per diluted share in the same period last year. Sales in the quarter advanced by 13 percent to $2.93 billion with comparable store sales advancing by over nine percent.
Dollar General had its share of trouble earlier in the decade, when it suffered management turmoil and turnover. The company had to settle a shareholder lawsuit over its 2007 acquisition by Kohlberg Kravis Roberts. The action took Dollar General's per diluted share figure down to the negatives in the 2008 third quarter when the metric otherwise would have been nine cents positive.
Yet, in November, 2009, Dollar General launched an IPO and hasn't looked back. After setting itself a capital expenditure budget of up to $300 million in 2009 to open 500 stores, it will raise the ante in 2010 to debut 600.
But why make a point of it by issuing a press release as it did yesterday? In part because dollar stores have gone mainstream. They're almost hip. With more middle class consumers visiting them, they've added cold cases where they can sell lots of the same branded food supermarkets offer for less money. They also have been able to take advantages of quality improvements by low-cost manufacturers to provide better everyday goods, whether towels or tops, for customers.
Dollar General is seeking recognition in part to demonstrate to the investor community that its on track â€" despite having had to deal with a heavy debt load from the KKR deal â€" and ready "to hire great talent," as Bob Ravener put it. He's Dollar General's senior vice president and, as the company characterizes his position, chief people office. The "great talent" remark is certainly meant to reference the retail employees being laid off by Sam's and Home Depot (HD) and now Hollywood Video, not to mention those retailers who will fall in with the consolidation trend.
Yet, Dollar General is also saying something to long-time customers and those new shoppers won over in the recession. It's declaring itself a dynamic, evolving company, one that might continue to do interesting things and shouldn't be abandoned when finances improve. The company's numbers certainly suggest customers are sticking with Dollar General, and it will do more than just talk to keep them coming back. The company's annual meeting isn't until June, but expect more interesting pronouncements from Dollar General, particularly around that event. It just may have started leading up to something.