Dollar General Bets That Bigger Is Better While Rivals Pare Down
(Bloomberg) -- Dollar General Corp. has always focused on opening tiny stores in remote areas where rival Walmart Inc. couldn’t bring its massive supercenters.
Now, the cozy dollar store is getting bigger.
Dollar General said Thursday that it’s planning two new store types, each with more space for a broader selection of products like fresh meat and beauty items, along with additional checkout lanes. One will have 8,500 square feet of selling space, while the other will have 9,500 square feet -- both larger than the traditional 7,300-square-foot layout. The retailer began testing both formats last year and found that they outperform existing stores, so they’ll form the backbone of its new-store development going forward.
“This larger format allows us to meet the growing needs of customers in underserved markets,” Chief Operating Officer Jeff Owen said on a call with analysts Thursday.
The company’s move to build bigger stores contrasts with broader trends in the retail sector. Big-box operators like Walmart, Target Corp. and Best Buy Co. are testing new layouts and initiatives that reduce their footprints, responding to the dramatic increase in online sales seen during the pandemic.
Just about all of Target’s new stores of late are small-format locations in cities or near college campuses, while Best Buy is testing a smaller sales floor to devote more room for processing e-commerce orders. Walmart, meanwhile, is carving out space in its backrooms for more than 100 automated mini-warehouses that will more efficiently pick online grocery orders. Even Burlington Stores Inc. is shrinking its huge coat emporiums.
While they’re growing in size, new Dollar General locations will still be a fraction the size of a Walmart, which has store formats in the U.S. that range from 38,000 feet for its Neighborhood Market to 182,000 feet for a Supercenter. Target’s smaller formats start at about 15,000 square feet, but the retailer said earlier this month it’s exploring new locations that are less than half that size.
Dollar General, based in Goodlettsville, Tennessee, is also expanding aggressively, with plans to open 1,050 new locations this year. The company recently surpassed 17,000 stores and says the U.S. could support 17,000 more discount retail locations.
Dollar General’s push into bigger stores wasn’t enough to offset a full-year sales and earnings forecast that disappointed investors, sending the shares down as much as 7.5% Thursday in New York -- the biggest decline in a year.
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