Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.ibd From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Companies In The News Date: Thu, 12 Nov 92 13:00:17 EST Message-ID: <8.1992Nov12.130018@AmeriCast.com> 11/12/92 TITLE Companies In The News #m#Dollar General Profits By Easing Shoppers' Tight Budgets John A. Jones For shoppers who don't have many dollars to stretch around their basic needs, Dollar General Corp. is a haven. Based in Nashville, Tenn., this company runs a chain of nearly 1,600 neighborhood discount stores in 24 states, primarily in small towns in the Midwest and Southeastern U.S. Investor's Business Daily, Retail/Discount & Variety ranks 10th, based on six-month stock-price performance with added weight given to recent months. In this series, leading companies within the group are reviewed. Dollar General stores sell apparel and shoes for the whole family, household linens, health and beauty aids, cleaning supplies, housewares, sta- #m#fixes bad break#m# tionery and seasonal items. In the latest fiscal year, soft goods accounted for 35% of sales, housewares 31%, health and beauty aids and cleaning products 29%, and shoes 5%. Dollar General says its typical customer earns a small paycheck or depends on monthly government assistance. Many customers are 25 to 45 years old, but "a sizable number" are retired, the company reports. More Bargain Hunters Now The cut-price stores have attracted many shoppers with higher in- comes, however, as the sluggish economy made more Americans price-conscious. Most of Dollar General's price tags are $10 or less, and generally no higher than $25. The company follows an everyday low price policy rather than taking temporary markdowns, and marks its price tags in even dollar amounts. Dollar General holds its prices down with a staff of buyers who bargain with a long list of suppliers. No single supplier ac- counted for more than 3% of purchases last year. About 30% of their soft goods purchases came from manufacturers' overruns, closeouts and irregular goods with minor flaws, and 10% of the hard goods were closeouts. Brand names accounted for about 20% of the soft goods and 40% of the hard goods. The company also stocks private-label products under its DG Signature brand. Earnings for the fiscal third quarter ended Oct. 31 rose 88% to 30 cents a share from 16 cents a year earlier. Net income was up 93% to $8.3 million from $4.3 million. Sales rose 18% to $223.5 million from $189.7 million. Nine-Month Net Doubled For the nine months to Oct. 31, earnings rose 97% to 69 cents a share from 35 cents a year earlier. Net income was up 105% to $18.8 million from $9.2 million. Nine- month sales rose 23% to $629 million from $511.4 million. Long-term debt on Oct. 31 to- taled $7 million, or 4% of total capital. Sales at stores open a full year rose 16.9% in the first nine months, including a 14.5% gain for October. Analyst Dan R. Wewer at Robinson-Humphrey Co. said Dollar General leads the value-oriented retailers, who all are doing well. He noted that Dollar General's gross profit mar- gin narrowed in the second quarter to 28.2% from 28.6% a year earlier, after the merchandise mix shifted slightly toward lower-margin "hard line" products and the company rolled back prices this year. A spokesman said soft lines are growing faster than hard lines now, however, bringing the mix closer to its his- toric balance. "It's the same strategy as Home Depot and Wal- Mart," Wewer said. "Reducing everyday prices hurts gross margin but enhances the competitive position and increases same-store sales. So the expense ratios are dropping significantly, more than offsetting the gross margin, and bottom-line profitability as a percentage of revenues is actually higher." CEO In Charge Since 1977 Chairman and Chief Executive Cal Turner joined the company in 1965 and was elected president and CEO in 1977. He has been chairman since January 1989. Turner reported that in line with its tight cost-control policy, the company eliminated its September advertising circular for this year's back-to-school sales period. Dollar General has cut its regular advertising circulars from 13 in 1987 to only five this year. #m#opt trim following graf#m#"Our reputation is best served by word-of-mouth advertising supported by radio," the com- pany said in its latest annual report. Turner said cutting out circulars has caused only a short-term impact on sales,#m#opt trim to end of sentence#m# while enhancing the company's long- term profitability. Dollar General has invested heavily in making its distribution more efficient, to fulfill its goal of keeping customers' basic needs in stock all the time. It spent nearly $17 million in 1989 and 1990 on automation and management information systems at its distribution centers in Georgia and Kentucky, and spent $9 mil- lion this year to double the size of the Georgia center. A spokesman said the company plans to wind up the year with 1,600 stores after a net gain of 90 outlets this year. In September, Dollar General entered its 24th state with 10 small-town stores in eastern Nebraska, the chain's first new state since 1983. Friday: Wal-Mart Stores This article is copyright 1992 Investors Business Daily. Redis- tribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM