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Category: Dollar General (DG) and Stock Market
Last updated: 29 May 2020 Stock price: $184.11 On this page we will look to provide more details about Dollar General, a general retailer in the United States with more than 16 000 stores and with annual sales topping $27 billion
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About Dollar General
We are among the largest discount retailers in the United States by number of stores, with 16,368 stores located in 45 states as of February 28, 2020, with the greatest concentration of stores in the southern, southwestern, midwestern and eastern United States. We offer a broad selection of merchandise, including consumable items, seasonal items, home products and apparel. Our merchandise includes national brands from leading manufacturers, as well as our own private brand selections with prices at substantial discounts to national brands. We offer our customers these national brand and private brand products at everyday low prices (typically $10 or less) in our convenient small-box locations.
Quick facts about Dollar General
- Dollar General is listed on the New York Stock Exchange (NYSE) under share code ticker: DG
- Number of stores as at end of February 2020: 16 368
- Consumables makes up 78% of their sales
- 143 000 full time employees
- Our stores average approximately 7,400 square feet of selling space
- Net sales for fiscal 2019: $27.7 billion
- Earnings per share for fiscal 2019: $6.64
- Dividends per share for fiscal 2019: $1.28
- Number of shares in issue: 258.053 million
- Net sales per square foot: $ 237
Merchandise of Dollar General
We offer a focused assortment of everyday necessities, which we believe helps to drive frequent customer visits, and key items in a broad range of general merchandise categories. Our product assortment provides the opportunity for our customers to address most of their basic shopping needs with one trip. We offer a wide selection of nationally advertised brands from leading manufacturers. Additionally, our private brand products offer even greater value with options to purchase both products that are of comparable quality to national brands as well as opening price point items, each at substantial discounts to the national brands.
Consumables is our largest merchandise category and has continued to become a larger percentage of our total sales as indicated in the table below. Consumables include paper and cleaning products (such as paper towels, bath tissue, paper dinnerware, trash and storage bags, and laundry); packaged food (such as cereals, canned soups and vegetables, condiments, spices, sugar and flour); perishables (such as milk, eggs, bread, refrigerated and frozen food, beer and wine); snacks (such as candy, cookies, crackers, salty snacks and carbonated beverages); health and beauty (such as over-the-counter medicines and personal care products including soap, body wash, shampoo, cosmetics, dental hygiene and foot care products); pet (such as pet supplies and pet food); and tobacco products. Seasonal products include holiday items, toys, batteries, small electronics, greeting cards, stationery, prepaid phones and accessories, gardening supplies, hardware, automotive and home office supplies.
Home products include kitchen supplies, cookware, small appliances, light bulbs, storage containers, frames, candles, craft supplies and kitchen, bed and bath soft goods. Apparel includes casual everyday apparel for infants, toddlers, girls, boys, women and men, as well as socks, underwear, disposable diapers, shoes and accessories.
The percentage of net sales of each of our four categories of merchandise for the fiscal 2019 indicated below was as follows:
Our seasonal and home products categories typically account for the highest gross profit margins, and the consumables category typically accounts for the lowest gross profit margin.
Consumables is our largest merchandise category and has continued to become a larger percentage of our total sales as indicated in the table below. Consumables include paper and cleaning products (such as paper towels, bath tissue, paper dinnerware, trash and storage bags, and laundry); packaged food (such as cereals, canned soups and vegetables, condiments, spices, sugar and flour); perishables (such as milk, eggs, bread, refrigerated and frozen food, beer and wine); snacks (such as candy, cookies, crackers, salty snacks and carbonated beverages); health and beauty (such as over-the-counter medicines and personal care products including soap, body wash, shampoo, cosmetics, dental hygiene and foot care products); pet (such as pet supplies and pet food); and tobacco products. Seasonal products include holiday items, toys, batteries, small electronics, greeting cards, stationery, prepaid phones and accessories, gardening supplies, hardware, automotive and home office supplies.
Home products include kitchen supplies, cookware, small appliances, light bulbs, storage containers, frames, candles, craft supplies and kitchen, bed and bath soft goods. Apparel includes casual everyday apparel for infants, toddlers, girls, boys, women and men, as well as socks, underwear, disposable diapers, shoes and accessories.
The percentage of net sales of each of our four categories of merchandise for the fiscal 2019 indicated below was as follows:
- Consumables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78.0 %
- Seasonal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.7 %
- Home products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8 %
- Apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 %
Our seasonal and home products categories typically account for the highest gross profit margins, and the consumables category typically accounts for the lowest gross profit margin.
Dollar General Stores
The Dollar General Store The typical Dollar General store is operated by a store manager, one or more assistant store managers, and three or more sales associates. Our stores generally feature a low-cost, no frills building with limited maintenance capital, low operating costs, and a focused merchandise offering within a broad range of categories, allowing us to deliver low retail prices while generating strong cash flows and capital investment returns. Our stores average approximately 7,400 square feet of selling space, and approximately 75% of our stores are located in towns of 20,000 or fewer people. We generally have had good success in locating suitable store sites in the past, and we believe that there is ample opportunity for new store growth in existing and new markets. In addition, we believe we have significant opportunities available for our relocation and remodel programs. Our store growth over the past three years is summarized by the following:
Number of stores open at end of year
Number of Dollar General stores per state
Most of our stores are located in leased premises. Individual store leases vary as to their terms, rental provisions and expiration dates. Many stores, including a significant portion of our new stores, are subject to build-to-suit arrangements with landlords, which typically carry a primary lease term of up to 15 years with multiple renewal options.
We also have stores subject to shorter-term leases, and many of these leases have renewal options. As of February 28, 2020, we operated 17 distribution centers for non-refrigerated merchandise with approximately 16.9 million square feet, four of which are leased and the remainder of which are owned. Approximately 7.25 acres of the land for one of the distribution centers is subject to a ground lease. We also leased approximately 1.1 million square feet of warehouse space in support of our distribution network for nonrefrigerated merchandise. In addition, we operated five cold storage distribution centers with approximately 1.1 million square feet, four of which are leased and one of which is owned, and we have executed leases for two additional cold storage distribution centers with approximately 0.7 million square feet, which are expected to be operational later in 2020. Our executive offices are located in approximately 302,000 square feet of owned buildings and approximately 42,000 square feet of leased office space in Goodlettsville, Tennessee.
Number of stores open at end of year
- 2017: 14 534
- 2018: 15 370
- 2019: 16 278
Number of Dollar General stores per state
- Alabama. . . . . . . . . . . . 796
- Arizona . . . . . . . . . . . . 121
- Arkansas . . . . . . . . . . . 452
- California . . . . . . . . . . . 226
- Colorado . . . . . . . . . . . 51
- Connecticut. . . . . . . . .64
- Delaware . . . . . . . . . . . 47
- Florida . . . . . . . . . . . . . 900
- Georgia . . . . . . . . . . . . 915
- Illinois . . . . . . . . . . . . . 578
- Indiana . . . . . . . . . . . . . 566
- Iowa . . . . . . . . . . . . . . . 264
- Kansas . . . . . . . . . . . . . 247
- Kentucky . . . . . . . . . . . 565
- Louisiana . . . . . . . . . . . 574
- Maine . . . . . . . . . . . . . . 58
- Maryland . . . . . . . . . . . 140
- Massachusetts . . . . . . . 50
- Michigan . . . . . . . . . . . 574
- Minnesota . . . . . . . . . . 163
- Mississippi . . . . . . . . . . 538
- Missouri . . . . . . . . . . . . 547
- Nebraska . . . . . . . . . . . 128
- Nevada . . . . . . . . . . . . 22
- New Hampshire . . . . . 40
- New Jersey . . . . . . . . . 148
- New Mexico . . . . . . . . 99
- New York . . . . . . . . . . 495
- North Carolina . . . . . . 870
- North Dakota . . . . . . . 42
- Ohio . . . . . . . . . . . . . . 858
- Oklahoma . . . . . . . . . . 461
- Oregon . . . . . . . . . . . . 57
- Pennsylvania . . . . . . . . 781
- Rhode Island . . . . . . . . 20
- South Carolina . . . . . . 564
- South Dakota . . . . . . . 55
- Tennessee . . . . . . . . . . 815
- Texas . . . . . . . . . . . . . . 1,552
- Utah . . . . . . . . . . . . . . . 11
- Vermont . . . . . . . . . . . 37
- Virginia . . . . . . . . . . . . 435
- West Virginia . . . . . . . 249
- Wisconsin . . . . . . . . . . 192
- Wyoming .......... 1
Most of our stores are located in leased premises. Individual store leases vary as to their terms, rental provisions and expiration dates. Many stores, including a significant portion of our new stores, are subject to build-to-suit arrangements with landlords, which typically carry a primary lease term of up to 15 years with multiple renewal options.
We also have stores subject to shorter-term leases, and many of these leases have renewal options. As of February 28, 2020, we operated 17 distribution centers for non-refrigerated merchandise with approximately 16.9 million square feet, four of which are leased and the remainder of which are owned. Approximately 7.25 acres of the land for one of the distribution centers is subject to a ground lease. We also leased approximately 1.1 million square feet of warehouse space in support of our distribution network for nonrefrigerated merchandise. In addition, we operated five cold storage distribution centers with approximately 1.1 million square feet, four of which are leased and one of which is owned, and we have executed leases for two additional cold storage distribution centers with approximately 0.7 million square feet, which are expected to be operational later in 2020. Our executive offices are located in approximately 302,000 square feet of owned buildings and approximately 42,000 square feet of leased office space in Goodlettsville, Tennessee.
Competition of Dollar General
We operate in the basic discount consumer goods market, which is highly competitive with respect to price, customers, store location, merchandise quality, assortment and presentation, service offerings, in-stock consistency, customer service, promotional activity, employees, and market share. We compete with discount stores and many other retailers, including mass merchandise, warehouse club, grocery, drug, convenience, variety, online, and certain specialty stores. These other retail companies operate stores in many of the areas where we operate, and many of them engage in extensive advertising and marketing efforts. Our direct competitors include Family Dollar, Dollar Tree, Big Lots, 99 Cents Only and various local, independent operators, as well as Walmart, Target, Kroger, Aldi, Lidl, Walgreens, CVS, and RiteAid, among others. Certain of our competitors have greater financial, distribution, marketing and other resources than we do and may be able to secure better arrangements from suppliers than we can. Competition is intense and we believe it will continue to be so, with certain competitors reducing their store locations while others move into or increase their presence in our geographic and product markets and increase the availability of mobile, web-based and other digital technology to facilitate a more convenient and competitive customer online and in-store shopping experience.
We believe that we differentiate ourselves from other forms of retailing by offering consistently low prices in a convenient, small-store format. We are able to maintain competitive prices due in part to our low-cost operating structure and the relatively limited assortment of products offered. Purchasing large volumes of merchandise within our focused assortment in each merchandise category allows us to keep our average product 8 2019 Form 10-K costs low, contributing to our ability to offer competitive everyday low prices to our customers. See “—Our Business Model” above for further discussion of our competitive situation.
We believe that we differentiate ourselves from other forms of retailing by offering consistently low prices in a convenient, small-store format. We are able to maintain competitive prices due in part to our low-cost operating structure and the relatively limited assortment of products offered. Purchasing large volumes of merchandise within our focused assortment in each merchandise category allows us to keep our average product 8 2019 Form 10-K costs low, contributing to our ability to offer competitive everyday low prices to our customers. See “—Our Business Model” above for further discussion of our competitive situation.
Trademarks of Dollar General
We own marks that are registered with the United States Patent and Trademark Office and are protected under applicable intellectual property laws. We attempt to obtain registration of our trademarks whenever practicable and to pursue vigorously any infringement of those marks. Our trademark registrations have various expiration dates; however, assuming that the trademark registrations are properly renewed, they have a perpetual duration. We also hold an exclusive license to the Rexall brand through at least March 5, 2026 and the Believe Beauty brand through at least March 23, 2022.
Seasonality of Dollar General's earnings
The nature of our business is somewhat seasonal. Primarily because of sales of Christmasrelated merchandise, operating profit in our fourth quarter (November, December and January) has historically been higher than operating profit achieved in each of the first three quarters of the fiscal year. Expenses, and to a greater extent operating profit, vary by quarter. Results of a period shorter than a full year may not be indicative of results expected for the entire year. Furthermore, the seasonal nature of our business may affect comparisons between periods.
Employees of Dollar General
As of February 28, 2020, we employed approximately 143,000 full-time and part-time employees, including divisional and regional managers, district managers, store managers, other store personnel and distribution center and administrative personnel. We have increasingly focused on recruiting, training, motivating and retaining employees, and we believe that the quality, performance and morale of our employees continue to be an important part of our success in recent years. We believe our overall relationship with our employees is good.
Dollar General (NYSE: DG) stock performance
The graph below compares Dollar General Corporation’s cumulative total shareholder return on common stock with the cumulative total returns of the S&P 500 index and the S&P Retailing index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from January 30, 2015 to January 31, 2020
A $100 invested at the end of January 2015 would have resulted in an investment worth around $242.48 as at the end of January 2020. That is an annual growth rate of 19.4% over the last 5 years, which is pretty strong returns provided to stockholders, this while the S&P 500 provided an average annual return of 12.4%. So the stock of Dollar General has grown at 1.56 times that of the S&P 500 over the last 5 years.
Our latest Dollar General stock valuation (29 May 2020)
So based on the 1st quarter and full year 2020 earnings report what do we value Dollar General stock at? Based on the earnings reported by Dollar General our valuation model provides a target (full value) price for Dollar General at $171.40 a stock.
We therefore believe the stock is overvalued at its current price. We usually recommend that long term fundamental or value investors look to enter the stock at least 10% below our target price (full value price) of $171.40. Therefore we believe a good entry point into Del Taco's stock would be at $154.30 or below.
We expect the stock of Dollar General to pull back slightly in coming weeks and months to levels closer to our target price.
We therefore believe the stock is overvalued at its current price. We usually recommend that long term fundamental or value investors look to enter the stock at least 10% below our target price (full value price) of $171.40. Therefore we believe a good entry point into Del Taco's stock would be at $154.30 or below.
We expect the stock of Dollar General to pull back slightly in coming weeks and months to levels closer to our target price.