Dollar General and Dollar Tree highlighted their growing store bases and a greater commitment to the in-store experience when addressing their third-quarter performance. Both retailers attributed their third-quarter gains to an improved basket size, better in-stocks, and strong Halloween seasonal performance.

Dollar General delivered strong Q3 results with net sales up 8.7% to USD6.4 billion for the quarter ended Nov. 2. Same-store comp growth was up 2.8% from the year-ago quarter. Through the end of the third quarter, Dollar General had opened 750 new stores, remodeled 925, and relocated 92. Of the 925 remodeled stores, 359 were in the Dollar General Traditional Plus (DGTP) format and 107 of those included fresh produce.

Net sales for the Dollar Tree enterprise were up 4.2% to USD5.54 billion for the quarter ended Nov. 3. The enterprise posted same-store comp growth of 1.0% with Dollar Tree again outperforming Family Dollar with comps of 2.3% and 0.4%, respectively. During the quarter, Dollar Tree opened 127 new stores (87 Dollar Tree, 40 Family Dollar), remodeled 14 (10 Dollar Tree, 4 Family Dollar), and closed 18 (6 Dollar Tree, 12 Family Dollar). The retailer also rebannered 30 Family Dollar stores to the Dollar Tree banner.

Two common themes emerged from the retailers’ Q3 earnings calls:

Renovations, remodels, and real estate look to enhance shopper proximity and improve product relevancy. By the close of Q3, Dollar General and Dollar Tree (under the Family Dollar banner) renovated 925 and 488 stores, respectively, to emphasize fresh, frozen, and snacking. Dollar General CEO Todd Vasos and Family Dollar President and CEO Gary Philbin both reiterated the importance of in-stocks on the customer experience and driving excitement around new merchandising initiatives.

Dollar Tree added 300 Snack Zone locations in the third quarter. Snack Zones are now in more than 800 stores, exceeding the retailer’s estimate of 750 for the year. As mentioned over previous quarters, a Snack Zone 2.0 is expected in 2019.

Dollar General brought the total number of cooler doors to more than 20,000 across its mature store base by the end of the third quarter. The shoppable queue lines added to 7,500 locations have been a success, with the rollout continuing in 2019.

The retailers took steps to achieve a frictionless and omnichannel experience. Both players prioritized digital in Q3 to remain aligned with shopper motivations. Dollar General rolled out its DG Go app to 250 stores by the end of the quarter, completing the planned rollout for fiscal year 2018. The app currently has over 20,000 active monthly users and 15 million subscribers to its digital coupon program.

Dollar Tree eCommerce program, Dollar Tree Direct, has been successful with small businesses and craft enthusiasts. The retailer also launched a substantial digital marketing campaign that includes organic social media postings and a landing page takeover of its homepage for the Aug. 30 launch of the Hallmark Signature partnership. Through that partnership, Dollar Tree has created a greeting card zone in stores with Hallmark-branded merchandise.

Anticipating 2018 Close and 2019 Planning

For the third consecutive quarter, Dollar Tree revised its fiscal 2018 sales forecast to USD22.72 billion to USD22.83 billion, down from USD22.75 billion to USD22.97 billion at Q2 close. Discount front-runner Dollar General also provided a financial update, anticipating net sales growth to be 9%, revised from the 9.0%-9.3% estimate it provided on Aug. 30. Dollar General also expects same-store comps in the middle of the mid-to-high 2% range, aligned with Aug. 30 estimates.

Moving into 2019, Dollar General plans to open 975 new stores, remodel 1,000, and relocate 100 stores. Additionally, 500 of the anticipated 1,000 remodels will be completed in the DGTP format; 200 of those are expected to include produce, which is known to boost renovated comps on the high end of the 10%-15% range. The retailer will also begin shipping from newly constructed distribution centers in Amsterdam, N.Y., and Longview, Texas, in the 2019 fiscal year.

Dollar Tree plans to continue its robust renovation efforts across Family Dollar, estimating 1,000 remodels in 2019. The enterprise estimates it will open 550 new stores (350 Dollar Tree, 200 Family Dollar) and rebanner 200 Family Dollar stores to the Dollar Tree banner by year end. To streamline operations, the enterprise plans to consolidate both banners’ headquarters in the Dollar Tree headquarters location in Chesapeake, Va., by fall 2019.

Anticipate digital integration to continue as both retailers look to optimize the branded shopping experience across their online, in-store, and loyalty platforms. Dollar General and Dollar Tree are emphasizing the importance of protecting and responding to their existing shopper base while also looking to capture new shoppers with expanded digital offerings and geographic distribution.

For more information, please contact:

Catherine Lang, Analyst
catherine.lang@kantarconsulting.com

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