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Dollar General is No. 1 retailer for opening stores this year

Dollar stores thriving in digital era
  • Dollar General is planning to open 975 stores in 2019, making it the top retail company for expanding so far this year — by a long shot. 
  • But it's not the only dollar store prospering as many once-mighty retailers are forced to fold after years of debt financing or competition from Amazon. 
  • After Dollar General, discount chains Dollar Tree, Family Dollar, Aldi and Five Below are in the top five for opening stores in 2019.

Even as the so-called retail apocalypse snaps up stores across the country, one seemingly unlikely business has remained standing, and thriving, in the digital era: Dollar General. While many once-mighty retailers close up shop, dollar stores overall are prospering: Out of nearly 2,780 stores slated to open thus far in 2019, about 1800, or more than half, are from discount chains, according to Coresight Research.

The top five retailers for planned store openings are Dollar General, Dollar Tree, Family Dollar, Aldi and Five Below. Dollar General alone is planning to open 975 stores, or nearly one-third of all stores announced to open thus far, making it the No. 1 company for expansion this year by a long shot. Dollar Tree follows with about 350 planned store openings. 

"We continue to invest in the business from a position of strength. We are continuing to prioritize new store expansion and other real estate projects," said Dollar General CEO Todd J. Vasos in a recent earnings call. By contrast, more than 7,200 stores have been put on the chopping block this year, including 2,100 Payless stores.

As iconic retailers are forced to fold from years of debt financing and competition from Amazon, many of the remaining companies are retreating and regrouping, developing strategies focused on bolstering experiences in stores or generating traffic online. However, discount chains like Dollar General have made their mark on recession-era shoppers by doing the exact opposite.

"The key retailers opening stores are the ones less impacted by what's going on in e-commerce," said Scott Mushkin, analyst at Wolfe Research.

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Dollar stores are typically smaller and offer less choice, making them easy for customers to navigate. They also supply goods that consumers need quickly after running out, such as a gallon of milk or a pack of razors. That makes them a convenient stop for shoppers on their way home from work — and resistant to a digital takeover.

They also perform well with consumers in all markets, rich or poor, urban or suburban. But they're experiencing the fastest growth in rural communities, where they may be the only available grocer for miles around and where larger retailers like Walmart and Amazon have struggled to make inroads.

Dollar General is installing freezers and coolers in its locations, and has rolled out a fresh-food initiative after facing criticism that the company doesn't offer healthy options for low-income communities. CEO Vasos said Dollar General is moving fresh food into 450 of its 15,600 stores and is also exploring opportunities to buy local. 

Regardless, Dollar General has consistently posted increasing revenues since it first went public 10 years ago. It racked up $6.62 billion in sales just last quarter, beating Wall Street analysts' expectations.

Considered "recession-proof"

Dollar stores continue to thrive, even as Americans are enjoying a full-employment economy, suggesting shoppers have internalized bargain-shopping behaviors learned during the Great Recession, according to eMarketer retail analyst Andrew Lipsman.

Analysts and shareholders are particularly partial to dollar stores because they're likely to do well even if the economy takes a downturn. That's particularly resonant as many retailers worry about the ongoing threat of tariffs on imported consumer goods. "It's one of the things that's so attractive about it," Wolfe Research analyst Mushkin said. "If tariffs slow the economy, history would suggest that dollar store sales would accelerate."

Dollar General's Vasos said as much in his last earnings call. He suggested that even if the next round of proposed tariffs go through, Dollar General is better positioned to benefit from the price increases.

"The great thing is this model works so well in good times and not-so-good times," Vasos said. "If this consumer is having to pay more across the board at every retailer because of these tariffs, we'll stand ready to build with open arms to take her in when she needs us most. And we're positioning ourselves for that as we move through 2019."