LOGINBy Thomas Paulson, Head of Market Insights
Dollar General reported $10.2B revenue for Q4, up +5.0% YoY, and above our +3.9% estimate* (120bps Moe, 97% correlation). Comp-sales increased +1.2% driven by consumables (+2.7%). The non-consumables comp was roughly flat, the best result since early 2021. Additionally, comp-tickets increased +2.3% and comp-transactions decreased -1.1%. Advan shows traffic per average store declining -0.4%. The earnings release quotes CEO Todd Vasos saying, “As we reflect on our full fiscal 2024 year, we believe our Back to Basics work is resonating with customers, as demonstrated by higher customer satisfaction scores and healthy market share gains.” The comp-ticket increase was driven by more units in the basket and a higher average unit price (which was likely the inflation in consumables). The more units is a testament to improved merchandising and store in-stocks, i.e. stronger retail execution, especially in non-consumables.
Back to Basics includes investment in store labor, store repairs & fresh ups, upgraded IT systems, and the like. Consequently, SG&A expense was up meaningfully (+8%) and operating profit down -24%. The store labor investment includes more shifts, higher wages, more and better paid district managers, etc; consequently, SG&A per store increased +5.0%. Higher investments are to continue with 2025 EPS expected to be down slightly. As it relates to 2025’s uncertainties, obviously the economic state of Dollar General’s core customer is difficult; additionally, there are the tariffs and potential cuts to government entitlement programs.
As shown in the chart above, Dollar General’s traffic has been relatively consistent, absent bad weather and the shortened holiday season. The general retail malaise that started in early February is also evident in its trend. As shown, that malaise has also impacted near-competitors. (At a conference this week, both Colgate and Procter & Gamble said the trend of late was softer than a month earlier when they spoke at CAGNY.) The higher growth for Family Dollar reflects its shuttering of underperforming stores, as such, the gains are driven by the store portfolio mix, and so we expect comp-traffic to be far less. For Dollar Tree, it’s the opposite: new locations, conversions, etc. As such, comp-traffic will be stronger than we show above. (We estimate* that Dollar Tree will report a +1.7% comp-sales increase.) Aldi is lapping large multiyear gains and setting up more difficult comparisons. Additionally they have a lot of new locations having added 80 (+7.4%) in the past year to reach over 2400. (Grocery retail is an industry where new stores take longer to reach full productivity, i.e. the chain-wide average).
The release also read, “the company initiated a store portfolio optimization review of its Dollar General and pOpshelf bannered stores, which involved identifying stores for closure or re-bannering based on an evaluation of individual store performance, expected future performance, and operating conditions, among other factors. As a result of this review, the Company plans to close 96 Dollar General stores and 45 pOpshelf stores, and convert an additional six pOpshelf stores to Dollar General stores in the first quarter... The Company is also reiterating its plans to execute approximately 4,885 real estate projects in fiscal 2025, including opening approximately 575 new stores in the U.S... fully remodeling approximately 2,000 stores, remodeling approximately 2,250 stores through Project Elevate, and relocating approximately 45 stores.”
On the Dollar General closures, Vasos said, “Many of which are in urban locations, have become increasingly challenging to successfully operate. These stores likely would have been closed in the ordinary course of the store's life cycle when their leases expired. However, we determined that closing these locations now will allow us to optimize our allocation of resources going forward.”
On pOPshelf, Vasos said, “As we enter 2025, we are optimistic about the pOpshelf banner (180 remain after the closures) and our opportunity to drive improvements in our sales results as customers' feedback on the brand and shopping experience continue to be strong. Going forward, we plan to build on the strength to increase sales through a variety of initiatives centered around new brand partnerships, an enhanced in-store experience, new and expanded categories, and a new loyalty and digital experience. As an example of these efforts, we recently implemented a new store layout with a heightened focus on toys, party, candy, and the beauty categories. While still early, we have been pleased with the results as we have seen a nice double-digit sales lift across a broad array of our pOpshelf stores. In addition to the opportunity to increase sales and ultimately realize further growth in the pOpshelf banner… We are looking forward to the opportunity to improve pOpshelf results in 2025, and we will continue to evaluate the brand to ensure we are seeing the desired impact of these activities and optimization.”
Vasos continued, “There's been a lot of competitors closing, many not in our space directly but some that were like, for instance, with Party City moving out, that's one reason. And you heard in our prepared remarks that we went in and rebalanced the inventory in our pOpshelf stores bringing in more parties, more occasions, more toys, things that will go directly for that consumer that is probably left looking for a place to shop. So I believe in competitive closings, there are opportunities. Drug continues to be our largest share donor as we look at our consumable share gains, which we're very proud of, and our non-consumable share gains, which we've been very proud of coming out of Q4 now moving into Q1. So I believe that there'll be further opportunities. And for us, that's the reason we're squarely focused on ensuring that we have our best foot forward. So when these customers come into our stores, they become sticky and continue to shop with us.”
*Utilizing the Maiden Century model.
Thomas has been Head of Market Insights for Advan Research since January 2025. Previously, he served as Director of Research and Business Development at Placer.ai, where he was instrumental in providing actionable insights derived from location analytics and the path for expansion into new verticals. His extensive background also includes two decades as a Wall Street analyst and portfolio manager in asset management at Alliance Bernstein, Cornerstone, and others. Linkedin profile.
