Dollar General ramps up expansion of Popshelf concept

Retail dive

Dive Brief:

  • Dollar General plans to accelerate the rollout of its new suburban-focused concept Popshelf.

  • The dollar retailer plans to open up to 50 Popshelf stores by the end of the year, exceeding past targets of 30 stores, Chief Operating Officer Jeff Owen told analysts Thursday.

  • In addition, Dollar General aims to add the Popshelf concept as a store-within-a-store to 25 existing locations in 2021, Owen added, according to a Seeking Alpha transcript. In all, Dollar General estimates it could add up to 3,000 additional Popshelf stores in the continental U.S.

Dive Insight: Dollar General announced the launch of Popshelf last year to target women shoppers in "diverse suburban communities" with income ranging from $50,000 to $125,000. As such, it allows Dollar General to capture sales from a customer outside its traditional core. Its merchandising approach includes "a combination of continually-refreshed merchandise, seasonal specials and limited-time items." With most items priced below $5, it spans seasonal, home decor and beauty products, as well as cleaning supplies and party goods. On Thursday, CEO Todd Vasos told analysts that the early results from Popshelf stores "far exceeded our initial expectations for both sales and gross margin." That performance prompted the retailer's accelerated expansion of Popshelf "as we look to capitalize on the significant growth opportunity we see for this differentiated concept," Vasos said. That is part of a broader expansion of Dollar General, which plans to open 1,050 stores in all this year. Along with Popshelf, the discounter has two newer concepts that it is expanding that cover around 8,500 square feet of sales space, with more cooler capacity, extended queue lines, produce in select stores, and larger health and beauty section, according to Owen.

All of this expansion follows a year of massive gains for Dollar General, which was among the retailers that expanded sales and customer bases during the pandemic, with shoppers consolidating trips and nonessential retailers temporarily closing their doors. For the full fiscal year, Dollar General's sales increased 21.6% year over year to $33.7 billion while net income hit nearly $2.7 billion. In the fourth quarter, sales jumped 17.6%. Looking ahead, Dollar General executives expect a slowdown in sales as the vaccine rollout reshapes shopping. In its 2021 guidance, Dollar General management forecasted sales to remain flat or decline by as much as 2% and for same-store sales to decline 4% to 6%. But on a two-year stack, that would represent an increase of 10% to 12%.

"At headline level this will look bad for a company with a strong track record of delivering consistent uplifts," GlobalData Managing Director Neil Saunders said in emailed comments. "However, in the first and second quarters Dollar General will be lapping a period in which there was unprecedented disruption in consumer behavior which brought it enormous benefits." The more accurate comparison, in Saunders' view, is with 2019, "and on this basis, we expect very strong underlying growth which will indicate the company has held on to some, although not all, of the gains made during the pandemic." Saunders attributed much of Dollar General's success, both before and during the pandemic, to its expansive footprint that places stores in convenient areas for rural and other shoppers.

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