Dollar General Flexes Its Financial Muscle [Part 1]

Perennial Discounter Stands On Its Own Against Walmart & Amazon And Enjoys Top Billing In Net Lease Investments.

As other retailers struggled during the disruption caused by the COVID-19 pandemic, Dollar General is one company that not only survived, but has continued to thrive. Dollar General is maintaining momentum that includes both stellar sales numbers and a rapidly expanding store base.

Dollar General is operating in one of the most attractive – and competitive – sectors of retail in value priced goods. Founded in 1939 and headquartered in Goodlettsville, Tennessee, Dollar General Corporation is one of the largest discount retailers in the United States. It faces broad competition from peers such as Family Dollar, Dollar Tree, as well as bigger discounters that include the likes of Walmart and 99 Cents Only Stores. Yet at the same time, Dollar General is clearly the market leader in the dollar store sector and the company’s leadership team sees sustained revenue growth, increase market share and store expansion footprint over the next 10+ years.

During the last fiscal year, Dollar General’s net sales jumped to $33.7 billion. That increase is due in large part to strong same-store sales that grew 16.3% compared to prior year. Ironically, Dollar General attributes at least part of its increase in sales last year to the pandemic. Consumers that received government stimulus checks spent them, at least in part, on the household goods, groceries, apparel and other essentials offered at Dollar General. That momentum has continued with the latest quarter net sales of $8.5 billion and operating profits that increased 4.9% to $909 million.

Although Dollar General saw a bump in sales last year, the retailer has been on a fast track for growth in recent years that shows no signs of slowing. During fiscal year 2022 the company plans to open 1,100 new stores on top of several thousand new stores opened over the last 6+ years. Currently, the company operates nearly 18,000 stores in 46 states and the firm has said that it sees the opportunity to add as many as 13,000 additional Dollar General stores in the U.S.

“We believe the fundamentals of the business are strong, and we are confident in the team’s ability to execute on our robust plans for 2022,” said Dollar General CFO John Garratt in the firm’s recent earnings release. “We are executing well against our operating priorities and strategic initiatives, which we believe positions us well to drive long-term sustainable growth. As always, we continue to be disciplined in how we manage expenses and capital with the goal of delivering consistent, strong financial performance, while strategically investing for the long term.”

At the core of the Dollar General business model is a combination of convenience and value. Most of its items are priced below $10, and its network of nearly 18,000+ stores is located within 5 miles of approximately 75% of the U.S. population.

Its success also is due to a focus on building strong customer loyalty, as well as a dedicated effort on new strategies to grow its sales. For example, the company has made a push to expand grocery items with fresh produce, refrigerator and freezer items. The company also is expanding with new store prototypes that include its DGX urban convenience store and pOpshelf bargain stores. The new pOpshelf stores offer customers a differentiated “treasure hunt” experience with an ever-changing merchandise mix at bargain prices (The vast majority of items are priced at $5 or less). By the end of fiscal year end 2025, Dollar General expects to have 1,000 pOpshelf locations open. The company has said that it sees the potential to open about 1,000 DGX stores and 3,000 pOpshelf stores in the U.S.

That growth has been a big win for investors in the public company. According to a report by Nasdaq, stock investors who bought stock in the company in June 2011 and held that investment as of June 22, 2021 would have experienced a 522% gain – not including dividends. For landlords and commercial real estate investors lucky enough to count Dollar General as a tenant, they have reaped the rewards of having a high-caliber credit tenant (S&P:BBB, Moody’s: Baa2) that provides steady rental income and strengthens the overall value of the underlying property.

Read more about the compelling reasons why a Dollar General NNN property could be the perfect investment asset for you in our Part 2 discussion of this stellar credit company.

For more information on Dollar General and to learn more about how Dollar General triple net lease (NNN) investment opportunities, please contact Andrew Vu at 415.539.1120.