Who says brick-and-mortar retail is dead?
It may be the age of e-commerce, and countless chains like Macy’s, (M), Staples (SPLS), and Kohl’s (KSS) may be closing stores. But some retailers are actually expanding.
Dollar General (DG) said at its annual investor day on Thursday that it would open 900 new stores this year, and then another 1,000 in 2017. That would bring the discounter’s already staggering store count to nearly 15,000 locations.
Now, Dollar General stores are typically small: they are on average only 7,400 square-feet in size and located in strip malls, a far cry from the typical 130,000 square-foot Macy’s.
But still, Dollar General recently completed its 26th straight year of same-store sales increases, a metric that strips out the effect of newly opened stores. In other words, the retailer’s new stores are not cannibalizing the more established ones. And Dollar General shares are trading near all-time highs.
Coming out of the recession, chains like Dollar General, and its competitors Dollar Tree (DLTR) and Family Dollar (now owned by Dollar Tree), exploded in popularity as consumers sought deeply discounted items at no-frills stores located nearby so they could save on gas. That hurt larger stores, Walmart (WMT) in particular, which have only emerged from those doldrums in the last year-and-a-half.
It turns out that shoppers have held on to those frugal habits. And Dollar General expects that to continue. The company is targeting annual sales growth of 7% to 10%, with earnings per share growing 10% to 15%.
Sure, it must have been disappointing to lose out to Dollar Tree last year when it tried to buy Family Dollar in a bitterly fought war, but Dollar General is doing just fine.