QUOTE AND NEWS
SeekingAlpha  6 hrs ago  Comment 
By The Specialist: There are usually two simple reasons one company seeks to acquire another company - either for synergies that lead to cost reduction, opportunities for growth, or both. In the case of Dollar General (NYSE:DG) making a big scene...
SeekingAlpha  10 hrs ago  Comment 
By George Hanley: Shareholders in convenience store operator The Pantry (NASDAQ: PTRY) have likely not been the happiest lot over the past five years, due to stock price appreciation that has significantly trailed the market averages. The company...
Benzinga  Aug 29  Comment 
In a report published Friday, MKM Partners analyst Patrick McKeever reiterated a Buy rating and $75.00 price target on Dollar General (NYSE: DG). In the report, MKM Partners noted, “Sales came in a bit light, though it sounds like the third...
Market Intelligence Center  Aug 29  Comment 
Dollar General Corporation (DG), which looks unwilling to relinquish its Family Dollar Stores Inc. (FDO) bid, came out with second-quarter fiscal 2014 results. Earnings of 83 cents a share met the Zacks Consensus Estimate and rose 7.8% from 77...
TheStreet.com  Aug 29  Comment 
NEW YORK (TheStreet) -- Dollar General ahad its price target raised by analysts ataBMO Capital Marketsato $78 from $65,awhile also maintainingathe company'sa"outperform" rating. "While DG's 2Q14 margin and sales results continue to point to...
SeekingAlpha  Aug 29  Comment 
By Daniel Jones: After reporting mixed revenue and earnings for the second quarter of its 2014 fiscal year on August 28, shares of Dollar General (NYSE:DG) inched up almost 1% to close at $64.20. According to its press release, revenue for the...
New York Times  Aug 29  Comment 
Gross margins fell 53 basis points to 30.8 percent in the second quarter, the sixth straight quarter without gross margin growth.
Motley Fool  Aug 28  Comment 
Dollar General missed on the top line, but management remains committed to its guidance for full-year earnings. Here's what you need to know about Dollar General's second-quarter results.
Benzinga  Aug 28  Comment 
Following the market opening Thursday, the Dow traded down 0.36 percent to 17,060.69 while the NASDAQ declined 0.29 percent to 4,556.18. The S&P also fell, dropping 0.26 percent to 1,994.86. Leading and Lagging Sectors Utilities shares...
Jutia Group  Aug 28  Comment 
[at CNBC] - Dollar General reported Q2 EPS of $0.83 ex-items on revenue of $4.72 billion. Anthony Chukumba, BB&T Capital Markets, shares his take on the bidding war for Family Dollar. Read more on this. Dollar General Corporation (DG), valued at...




 
TOP CONTRIBUTORS

Dollar General Corporation (NYSE: DG) is the largest discount retailer in the United States by number of stores.[1] Dollar General competes with other discount retailers, such as Family Dollar Stores (FDO) and Dollar Tree Stores (DLTR), as well as wholesale retailers such as Wal-Mart (WMT) and Target (TGT). In fiscal 2010, DG posted net sales of $13 billion and net income of $627.9 million.

Discount retailers are poised to succeed during recessionary economic conditions, as consumers try to buy their everyday items at lower prices. Dollar stores struggle when operating costs increase, as such stores cannot raise prices of goods sold, and thus cannot pass costs on to consumers. The increased demand for discount retailers has exceeded costs of operations, which has lead to Dollar General to have double-digit net sales growth in each of its last two fiscal years.

Company Overview

Business Growth

Dollar General launched its Initial Public Offering (IPO) in November 2009, selling $34.1 million shares at $21 per share.[2]

Fiscal Year 2010 (ended January 28th, 2011)

  • DG posted net sales of $13 billion, a 10.5% increase compared to fiscal 2009.[1]
  • Net income increased 85% to $627.9 million.[1]

Business Segments

  • Consumables (71.6% of fiscal 2010 net sales)[1]
  • Seasonal (14.5%)
  • Home Products (7.0%)
  • Apparel (6.9%)

Geographic Presence

Dollar General operates only in the United States. The firm has 9,414 retail stores located in 35 states, with the top 10 states (by number of stores) listed below:

  • Texas (1,080 stores)
  • Georgia (541)
  • Alabama (512)
  • Florida (505)
  • Ohio (510)
  • North Carolina (536)
  • Tennessee (489)
  • Pennsylvania (421)
  • South Carolina (375)
  • Louisiana (369)

Trends and Forces

Discounters Experience Difficulty Passing on Cost Increases to Customers

Because Dollar General’s low-income customer base is highly sensitive to price and because the company competes largely with merchandise prices fixed to be under $2, input cost increases (such as inventory, overhead, and marketing) are difficult or impossible to pass on to consumers. Although the company has been able to raise some prices - changing an item that was 2 for $1 to 59 cents apiece, for example - the prices of the vast majority of its goods cannot be increased. Macroeconomic and company specific changes to cost structure, including higher freight costs, rising energy prices, and supplier or distributor consolidation increases the risk of large margin decreases that cannot be offset by price increases.

Stiff Competition and Low Competitive Advantages in a Mature and Saturated Market

Family Dollar competes against discounters with wider selection and significant cost and scale advantages in its local markets. A Family Dollar store operating within a few miles of a nearby Wal-Mart or Target, for instance, will struggle to compete on value and selection, and may instead gain customers via convenience and location. It also faces competition faces other “dollar stores,” that have similar or identical value propositions, such as Dollar Tree Stores (DLTR), Family Dollar Stores (FDO), and 99 Cents Only Stores (NDN). With low barriers to entry and few natural competitive advantages to gain, the industry has become flooded with dollar stores and collectively, these companies are approaching U.S. saturation. While Family Dollar has some competitive advantage in the southern US states, there is substantial risk of lower margins due to increased overhead expenses as well as stiff competition as other discounters pursue the same strategies.

Dollar General Thrives During Economic Crisis

Dollar General sells similar products as wholesale retailers Wal-Mart (WMT) and Target (TGT), but typically at lower prices. Because of this, during harsh economic conditions, many consumers may make the change of shopping at Dollar General instead of a regular wholesale retailer.

Competition

Off-Price Retailers

  • Dollar Tree Stores (DLTR) Dollar Tree operates 3,806 stores in the United States. The company sells all of its products for $1.[3]
  • Family Dollar Stores (FDO) Family Dollar offers similar products as DG and also sells all of them for $1.
  • 99 CENTS ONLY STORES (NDN) 99 CENTS ONLY STORES operates 275 stores in the United States. The company sells all of its products for 99 cents or less. Food and grocery sales account for more than half of the company's annual revenue.[4]

Wholesale Retailers

  • Wal-Mart (WMT) Wal-Mart sells brand-name products that DG sells, and at higher prices.
  • Target (TGT) Target sells brand-name products that DG sells, and at higher prices.
  • Costco Wholesale (COST) Costco offers similar products as DG, but in bulk quantities.

References

  1. 1.0 1.1 1.2 1.3 DG 2010 10-k
  2. Reuters, "Dollar General IPO prices at low end," 11/12/2009
  3. DLTR 2009 10-K pg. 8
  4. NDN 2010 10-K pg. 3
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