Arkansas may be known for Walmart, but Dollar General has it outnumbered.
The small-box retailer, based in the Nashville suburb of Goodlettsville, Tennessee, has about 415 locations in the state, an increase of almost 70 percent since 2010. That figure is more than three times the number of Walmart stores in Arkansas and more than four times the number of Walgreens in the state.
And Dollar General Corp. isn’t done. The discount retailer plans to open about 900 stores nationwide during the current fiscal year, said spokeswoman Mary Kathryn Colbert. It has 14,534 stores in 44 states, nearly half of them in the South.
Colbert wouldn’t say if any of the new stores were coming to Arkansas. She said the company plans to renovate about 1,000 locations and relocate about 100 stores this year.
Dollar General sells everything from dog food to dish soap, in stores averaging about 7,300 SF of sales space. While department stores have closed hundreds of locations in recent years and malls are struggling, Dollar General has been a retail bright spot. It’s also been a godsend to small towns in Arkansas with a limited range of retailers or grocery stores.
A depressed economy in some parts of the country has factored into the success of publicly traded Dollar General, and Dollar Tree Inc. of Chesapeake, Virginia, which sells items priced at $1 or less, said Jay Sinha, an associate professor who teaches marketing strategy at the Fox School of Business at Temple University in Philadelphia. “In many of these rural areas, the economy is … very stagnant and the real wages are not going up.”
Dollar General has also improved its product selection over the years, which has contributed to its growth, Sinha said.
“The people find it much more affordable, even more than Walmart,” he said.
Analysts agree that dollar stores are is in a better position than other retailers because of “low price points and relative resistance to economic cycles,” according to an Aug. 3 credit opinion from Moody’s Investors Service, which gave Dollar General a stable outlook rating.
Moody’s expects Dollar General’s same-store sales and operating profits to continue growing. For the fiscal year that ended Feb. 2, Dollar General had $23.5 billion in sales, up 6.7 percent from 2016. Its net income for the fiscal year was $1.5 billion, up from $1.2 billion. It also boasts 27 consecutive years of same-store sales growth, Colbert said. Last fiscal year, that measure was up 2.7 percent.
Year* | Number |
2005 | 207 |
2006 | 218 |
2007 | 222 |
2008 | 224 |
2009 | 227 |
2010 | 246 |
2011 | 268 |
2012 | 287 |
2013 | 306 |
2014 | 325 |
2015 | 344 |
2016 | 365 |
2017 | 392 |
2018 | 415** |
*Typically at the beginning of March
**Approximate
Source: Dollar General Corp. and its filings with the U.S. Securities & Exchange Commission
Expanding Its Reach
At the end of its fiscal 2017, Dollar General estimated that 75 percent of the U.S. population was within 5 miles of a Dollar General store, CEO Todd Vasos said in a Dec. 7 conference call, transcribed by Seeking Alpha, a website providing market analysis and research.
Its store sizes, ranging from 3,500 SF to 16,000 SF, allow Dollar General to enter any market, “from rural to metro locations,” he said.
Dollar General’s core customer has a total household income of around $40,000, Colbert said. That’s very close to Arkansas’ median household income, which the U.S. Census Bureau put at $42,332 in 2016 dollars.
The retailer hopes to redesign snack and beverage aisles this year “to create a best-in-retail shopping experience,” Vasos said. The change will position the company as “a destination retailer … through assortment and everyday low prices,” said Vasos, the same pricing strategy used by Walmart. Plans also call for expanding coolers “to allow a greater assortment of perishable foods, ice cream, single-serve drinks and cold beer.”
Stores are expected to have an average of 18 refrigerator or freezer doors, up from 10 in 2012.
Most of Dollar General’s products cost less than $10, and the total average transaction is about $12, he said. “Our stores and product mix are streamlined to help make the shopping trip convenient for our customers,” Vasos said. “They can easily shop our stores [and] find what they need.”
Following Walmart’s Lead
Sinha, of Temple, said Dollar General is following Walmart’s growth playbook by opening in small towns across the U.S.
“If you recall, Walmart grew below the radar, away from the gaze of Kmart,” Sinha said.
When Walmart tried smaller store locations, however, results were eventually disappointing.
Walmart launched its smaller format Walmart Express in 2011 as a pilot program. In March 2013, Bill Simon, then CEO of Walmart U.S., said during an investors conference that the company was pleased with the performance of the stores, which were 12,000-15,000 SF, less than a tenth the size of a supercenter.
Simon said the Express stores weren’t meant to compete with dollar stores, even though people saw them that way.
Walmart Express stores all had “fresh food and pharmacy and the Walmart everyday low price promise,” he said, and other items that could be stocked from Walmart’s distribution system.
“These are not dollar stores as you would think of them, or drugstores,” Simon said. “They have a sales volume that’s fairly substantial compared to a dollar store, five to eight times what a dollar store might do.”
Still, the dollar stores sold items cheaper than Walmart did, Sinha said. “At the end of the day, it has to come down to price,” he said.
Helping Small Towns
In January 2016, Walmart announced it was closing 154 stores in the United States — including all 102 Walmart Express stores. Ten were in Arkansas. Dollar General wasted no time: In July 2016, it bought 41 of the Walmart Express stores in 11 states, including two in Arkansas, at Mulberry and Decatur.
Mayor Gary Baxter of Mulberry said the Crawford County town had a Dollar General before the Walmart Express opened. After the Express closed, Dollar General moved into that location, which allowed it to add groceries and fresh fruits and vegetables.
Without the Dollar General, the residents of the town of 1,655 would have to drive 7-8 miles to Alma to do their grocery shopping. Baxter said a “significant amount” of the town’s residents are on government assistance.
“We’re very thankful for Dollar General,” Baxter said. “But we do feel we could support a full-service grocery store also.”
The city of Charleston also had a Dollar General before a Walmart Express opened, said Mayor Sherman Hiatt. Residents rely on the Dollar General if they forget something or if they are unable to drive the 20 miles to Fort Smith, where most of Charleston’s residents work and shop.
“You don’t see the parking lot empty,” Hiatt said. “There’s always somebody in there, buying some groceries.”
Dollar General’s private label brand, Rexall, also has kept prices low, he said. “That helps some of the lower-income people be able to afford certain things,” Hiatt said.
Vasos, the Dollar General CEO, said in the December conference call that the company built Rexall to nearly $200 million in sales in seven years.
“We know that private brands resonate with our customer when we deliver the right combination of price and quality,” he said. “Private brands play a significant role in helping our customers manage their budget.”
DeWitt Mayor Ralph Relyea said Dollar General has been an asset to his southeast Arkansas town “because we’re short on retail outlets.” Even though the city has a Kroger and a Piggly Wiggly, customers pop into the Dollar General for items not sold in the grocery stores, he said. “There are customers in it all the time.”
The Dollar General in Decatur, a Benton County town of fewer than 2,000 people, is one of the few stores in Arkansas that offer a wide range of grocery items, Mayor Bob Tharp said.
“It’s not a full grocery,” said Tharp, who was featured in Bloomberg Businessweek in an Oct. 11 story headlined “Dollar General Hits a Gold Mine in Rural America.” However, he said, a store customer could find steak, salad, fish and frozen foods.
Decatur had a Walmart Express before it closed. The town’s existing Dollar General relocated to the Walmart Express building.
“If you didn’t know you were in a Dollar General, you would probably think you were in a Walmart Express,” Tharp said.
States With Most Dollar General Stores
As of March 3, 2017
State | Number of Stores | |
---|---|---|
1 | Texas | 1,353 |
2 | Florida | 781 |
3 | Georgia | 758 |
4 | North Carolina | 730 |
5 | Ohio | 705 |
6 | Tennessee | 700 |
7 | Alabama | 688 |
8 | Pennsylvania | 604 |
9 | Louisiana | 511 |
10 | South Carolina | 484 |
18 | Arkansas | 392 |
Source: Dollar General Corp.