Here's Why Dollar General (DG) Stock Warrants Your Attention
Dollar General Corporation DG remains a compelling growth story in the retail space. Due to its value-creating initiatives, defensive product mix and real estate growth strategy, the company has the capability to gain market share. Moreover, its commitment to better pricing, private label offerings, effective inventory management and merchandise initiative should drive sales.
Dollar General expects net sales growth of about 11% — including an estimated benefit of approximately two percentage points from the 53rd week — for fiscal 2022. The company now foresees same-store sales growth toward the upper end of its earlier projected range of 4-4.5% for the fiscal year of 2022. Let’s delve deep.
Striking the Right Chord With Customers
Dollar General’s initiatives such as DG Fresh, Fast Track, non-consumables, digitization and the private fleet should benefit the top line. The company has been sparing no effort to bolster omnichannel operations and ramp up delivery services to provide customers with a frictionless shopping experience. Its partnership with DoorDash continues to yield results, with same-day delivery now available at more than 13,000 stores at the end of the third quarter of fiscal 2022.
Talking about the company’s transformational initiatives, DG Fresh is designed to enable the self-distribution of fresh and frozen products. Meanwhile, Fast Track aims at increasing labor productivity in stores, enhancing customer convenience and improving on-shelf availability.
Under DG Fresh, the company has been expanding its cooler facilities to enhance the sale of perishable items. In the third quarter, the company installed more than 17,000 cooler doors across its store base. The company completed the initial rollout of DG Fresh across the entire chain and is now delivering to nearly 19,000 stores from 12 facilities.
With respect to Fast Track, the company has been expanding its self-checkout facility, which was available in more than 10,500 stores at the end of the third quarter.
pOpshelf Store - Another Catalyst
Dollar General, through its pOpshelf stores, targets affluent customers looking for better bargains. In the third quarter, the company opened 23 new pOpshelf locations, which took the total count to 103.
Additionally, at the end of the quarter, the company had a total of 40 store-within-a-store concepts, a smaller pOpshelf store in Dollar General’s larger-format stores. Management reaffirmed its plan to nearly triple the pOpshelf store count, which would result in about 150 stand-alone pOpshelf locations by the end of fiscal 2022.
Further, the company plans to nearly double the pOpshelf store count next year. The company’s real estate plans for fiscal 2023 include opening approximately 150 additional locations. These will bring the total number of pOpshelf stores to about 300 by the end of fiscal 2023. The company is targeting approximately 1,000 pOpshelf stores by the end of fiscal 2025.
Dollar General’s differentiated product range resonates well with customers’ spending habits. The company, which shares space with Target TGT, Costco COST and BJ’s Wholesale Club BJ, is making every effort to enhance guests’ experience via unique store concepts, affordable and convenient assortment and other innovations.
A Synopsis of Other Stocks
Target has been deploying resources to enhance omnichannel capabilities, come up with new brands, refurbish stores and expand same-day delivery options to provide customers with a seamless shopping experience. Target has been making multiple changes to its business model to adapt and stay relevant in the ever-evolving retail landscape. These have been contributing to the top line.
Costco continues to be one of the dominant warehouse retailers based on the expanse and quality of merchandise offered. The company’s key strengths are strategic investments, a customer-centric approach, merchandise initiatives and an emphasis on membership growth. These factors have been helping it register impressive sales numbers. Costco’s net sales grew 8.1% year over year to $53,437 million, while membership fees increased 5.7% to $1,000 million in the first quarter of fiscal 2023.
BJ's Wholesale Club’s ability to steer the tough retail environment validates its strong customer value proposition and business model. Its relentless efforts to boost the membership base, simplify assortments, enhance digital capabilities and accelerate club openings should support sales. Total comparable club sales jumped 9.7% in the third quarter of fiscal 2022. Excluding the impact of gasoline sales, comparable club sales rose 5.3%.
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