April 01, 2016

Dollar General’s Aggressive Expansion Plan for 2016

Dollar General Corporation is a value for money shopping destination that has been in business for 75 years. It offers a wide variety of products at affordable prices in convenient neighborhood locations. As of January 2016, Dollar General had 12,483 stores spread across 43 states.

2015: A banner year for Dollar General and the future looks even brighter

Last year, Dollar General had relocated or remodeled 881 stores and launched 730 new stores. The 4th quarter sales increased by 7 percent to $5.3 billion. Also, transaction size and customer traffic grew exponentially thereby leading to a 2.2 percent increase in same store sales. The total sales for 2015 grew by 7.7 percent to $20.4 billion.

The company is expected to extend this streak of record profits and sales into 2016. It has an aggressive plan to open 900 new stores in 2016. (1)

Dollar General has also forecasted that, for the fiscal year 2017, it will remodel and relocate around 900 stores as well as launch about 1,000 new stores. This projection was based on the new growth model that outlined an increase of 6 to 8 percent in square footage.

Dollar General: Could shareholders see a 17% return?

The plan to launch so many new stores in 2016 is quite ambitious, but the company predicts that it will even exceed the 900 figure mark in the year 2017. The new plan projects 7 to 10 percent growth in annual sales, primarily riding on a combination of 2 to 4 percent same-store growth in sales and 6 to 8 percent growth in square footage. The per share earnings growth from the topline growth is projected to be 10 to 15 percent and after inclusion of dividends, shareholders will get a return of 11 to 17 percent.

The new targets were elaborated by the CEO of Dollar General Todd Vasos during the release of 4th quarter results of the company. Vasos was elated that 2015 was another great year for Dollar General. Of the new plan, he stated that the powerful new strategic agenda will allow Dollar General to drive the bottom line as well as the top line thereby helping deliver the robust financial gains which were stated in the company’s growth model for the long term. The management was confident that the well-organized capital structure and the healthy cash flow will provide strong opportunity to the company for investment in growth as well as sturdy cash returns to the shareholders via expected quarterly dividends and steady share repurchases.