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Dollar General Climbs As Bid To Entice New Shoppers Pays Off

Published on Dec 7 2017 4:00 PM in Retail tagged: US Retail / Dollar General / Discount Retailer

Dollar General Climbs As Bid To Entice New Shoppers Pays Off

A makeover at Dollar General is beginning to get results.

The retailer posted strong sales on Thursday, boosted by new customers streaming into the discount chain. Shopper traffic - and the amount they spent - grew in the third quarter, helping send the shares on their biggest rally in about six months.

Dollar General has been upgrading its stores and adding hundreds of new locations - part of a bid to go after a broader swath of shoppers, including a more upscale consumer who might not typically visit a dollar store.

“We are encouraged by the early progress,” Neil Saunders, managing director of GlobalData Retail, said in a note. “The company is capturing a more significant share of spending from middle income and more affluent Americans.”

Sales Growth

Third-quarter profit amounted to 93 cents a share, missing analysts’ estimates by a penny. But comparable sales growth - a closely watched measure - came in at 4.3%. Analysts had projected 2.7%, according to Consensus Metrix.

The company now expects sales to grow 7% this year. It had previously forecast a range of 5% to 7%. It also narrowed its profit guidance, saying earnings would be $4.37 to $4.47 a share.

The stock gained as much as 6.3% to $96.60 on Thursday, marking the biggest intraday increase since June 1. The shares had climbed 23% this year through Wednesday’s close.

At a time of broader retrenchment in the retail industry, Dollar General is on a store-opening binge. Next year, it plans to add 900 new locations and remodel 1,000 current stores. It’s also relocating 100.

“Almost 75% of the population now live within five miles of a Dollar General store,” Saunders said. “This makes the company the closest and most convenient general merchant for millions, especially those living in rural areas.”

News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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