Dollar General reported another monster pandemic-fueled quarter, during which same-store sales jumped 18.8% during the second quarter ended July 31. Net sales increased by 24.4%.
The company said it believes consumer behavior driven by COVID-19 has driven the lift in comparable-store sales and net sales, noting that a decline in customer traffic was accompanied by customers consolidating trips to limit social contact. The retailer reported similar gains in Q1 with net sales up 27.6% and same-store sales up 21.7%.
The retailer’s growth will feed its store expansion plans, which include 1,000 new stores hundreds of remodels. These additional stores would put the dollar chain past 18,000 total stores.
Executives didn’t share too many specifics about Dollar General's private brand efforts during an analyst call but said they remain a priority. The company saw great progress with the rebranding of its office products store brand and said it will continue to expand and rebrand its private label lines going forward. The private label lines as part of its new DG Fresh refrigerated and frozen foods initiatives also are helping to be the biggest driver of the company’s overall gross margin.
Dollar General is continuing to add more cooler doors to stores, aiming to have its DG Fresh initiative in 14,000 stores by year’s end — exceeding its original goal of 12,000.
The company also saw strong sales from its non-consumables initiative, dubbed NCI, noting that of the more than 400 stores carrying the expanded assortment saw an 8% increase in same-store sales compared to stores without the NCI strategy. This growth is pushing the retailer to roll out a version of the non-consumables program to 5,400 stores by end of 2020.
With shoppers looking to be more socially distanced, Dollar General also said it would continue to push its new digital initiatives, including its buy online, pick-up in-store offering, DG Pickup. DG Pickup is said to be offered to 2,500 stores now, an aggressive leap from just 40 stores in Q1, and will be in all stores by end of Q3. Mobile checkout and self-checkout options also will be aggressively pushed as customers look for contactless shopping.
“We continue to operate from a position of strength and are excited to announce the acceleration of several key strategic initiatives, including the rollout of DG Pickup, DG Fresh, and our Non-Consumables initiative, as well as an increase in our expected number of real estate projects for fiscal 2020,” said Todd Vasos, Dollar General CEO. “Our robust portfolio of initiatives, coupled with our expansive real estate footprint of nearly 17,000 store locations, positions us well to continue delivering value and convenience for our customers while driving sustainable long-term growth and value for our shareholders.”
Operating profit for the second quarter of 2020 increased 80.5% to $1.0 billion compared to $577.8 million in the second quarter of 2019. Operating profit for the second quarter of 2020 increased 71.3% compared to Adjusted operating profit for the second quarter of 2019 of $608.8 million1, which excluded the impact of the Significant Legal Expenses. The second quarter of 2020 included approximately $38 million of incremental investments the company made in response to the COVID-19 pandemic. These investments included measures taken to further protect the health and safety of employees and customers, and approximately $13 million in appreciation bonuses for eligible front-line employees.