Dollar General to target food deserts with its DG Market concept

Goodlettsville, Tenn. — Dollar General on Monday told analysts the company plans to open 40 DG Market concepts in 2012 in both new and existing markets based on the success of the concept.

"The results of the DG Market remodels we have completed to date and the early success of our five DG Market stores in Las Vegas are very encouraging," Dollar General chairman and CEO Rick Dreiling told analysts Monday morning. "We introduced our updated general market banner in Nevada and these stores are performing well above our initial expectations. These are our first new Dollar General Markets since early 2007 and we’re excited about introducing the concept into new markets."

DG Market stores offer a wider variety of dry groceries and perishables, in addition to the general merchandise selections at a typical Dollar General store.

DG Markets have average annual sales of $4 million to $5 million, versus the $1.4 million across the regular formats, according to David Tehle, Dollar General CFO and executive VP. "The raw margin dollars and profit margin dollars that we get out of a DG Market is very impressive. Now, the mix is more consumable so the margin percent is somewhat lower but again the dollars, the raw dollars we get because of the volume is very impressive," he said. "We also think there’s an opportunity in smaller markets that are what we call food deserts to add tremendous volume where we can go into a town that really needs a DG Market and get a lot of volume and get a lot of market share. That’s really the way we’re playing the DG Market."

"We believe the DG Market concept is well positioned to serve food deserts in both rural and metro areas and reinforces DG’s heritage of serving the underserved," Dreiling added.

Companywide, Dollar General also is looking to further expand its cooler presence. Currently, new stores are opening with 14 to 16 coolers and the company will be installing four additional cooler doors in approximately 1,200 existing locations to better serve their "time conscious customer."

"Fresh and refrigerated foods helped us drive customer traffic and increase basket size by serving a greater share of our customers’ needs," Dreiling said.