Dollar General CEO confirms it shut down 51 stores in less than 6 months & claims shopper spending ‘took toll’ on chain

DOLLAR General has reflected on its economic standing in its second-quarter earnings call, noting the challenges it faced.

The discount chain shuttered 51 locations in less than six months, attributing its financial decline to a drop in shopper spending.

In an earnings announcement last week, Dollar General shared that its profits had declined 20.2% from $468.8 million in 2023 to $374.2 million this year.

The drop in the retailer's net income comes as shoppers struggle to make ends meet in the current economic climate, according to Dollar General CEO Todd Vasos.

Dollar General's main customer base is low-income consumers, who have been hit the hardest by inflation.

“Historically, Dollar General has done well during these tough times, but stronger competition seems to be taking a toll,” said retail analyst Joe Feldman, per Retail Dive.

Shoppers with an annual income below $35,000 make up around 60% of Dollar General's overall sales.

While we believe the softer sales trends are partially attributable to a core customer who feels financially constrained, we know the importance of controlling what we can control."

However, the CEO noted that 60% of those consumers have reported needing to reduce their spending on necessities because of higher prices as they struggle to pay for other basics like rent and utilities.

“It appears to us very strongly that ... this lower-end consumer continues to be very much financially strapped especially as it relates to her ability to feed our families and support her families,” said Vasos.

“[T]his is a cash-strapped consumer right now, even more so than what we saw in Q1.”

Although the chain's year-on-year profit dropped by nearly $100 million, its second-quarter net sales increased 4.2% from $9.8 billion last year to $10.2 billion this year.

The increase in net sales was attributed to a growth in consumables, which includes products that must be replaced regularly, such as food, beverages, cleaning supplies, and personal care items.

On the other hand, that growth was partially offset by drops in spending on non-essentials such as seasonal home and clothing.

As low-income households spend less and less at Dollar General, so too do middle-income and wealthier consumers.

Feldman guessed that these customers are likely upping their spending at retailers such as Walmart, Aldi, Lidl, and Ollie’s Bargain Outlet.

These financial challenges and shifts in consumer behavior also pushed the retailer to close 51 stores from February this year through August.

However, Dollar General opened 410 stores during the same period.

The company ended quarter two with 20,345 locations under five banners in the US and Mexico.

BACK TO BASICS

As Dollar General pushes forward, it will focus on directing its initiatives back to the basics.

“While we believe the softer sales trends are partially attributable to a core customer who feels financially constrained, we know the importance of controlling what we can control," said Vasos.

"With the evolving retail and consumer landscape in mind, we are taking decisive action to further enhance our value and convenience offering, as well as the in-store experience for our associates and customers.”

2024 Store Closures

Retailers across the country have suffered with changing customer habits and the economy, which has led to closures.

• The furniture chain Badcock Furniture & More confirmed that it will close all of its 380 stores after filing for bankruptcy.
• High-end grocery store chain Pusateri’s Fine Foods closed all but one location after it quietly filed for bankruptcy.
• Stop & Shop has shut 32 of its locations.
• Dollar General has closed five locations in the same neighborhood.

Dollar General's strategy includes improving the checkout experience by removing self-checkout from “the vast majority of stores.”

The discount retailer also intends to cut inventory loss, better manage stock, and boost distribution efficiency.

Additionally, Dollar General is working to cut the amount of products it sells by 1,000 stock keeping units, or SKUs, by the end of the year.

The retailer also intends to uphold its previous plans to open 730 locations, remodel 1,620 stores, and relocate 85 locations during its 2024 fiscal year.

“While we’re not satisfied with the financial results for the second quarter, we are pleased with the continued progress in our back-to-basics work, and we believe we’re taking the necessary actions to build on this progress and drive the business forward,” said chief financial officer Kelly Dilts.

Dollar General's financial hardship has become visible in-store, as shoppers notice security tags on shopping baskets.

Plus, read about the discount retailer's penny items and why some employees refuse to honor the policy.