Dollar General sees P1 apparel as key to increasing bottom line

Discount Store News, June 22, 1998 by Mike Troy

GOODLETTSVILLE, TENN. -- Dollar General is launching a new private label apparel program and doubling the capacity of its distribution system as it looks to maintain the enviable track record of being this decade's best-performing retail stock.

According to chairman and ceo Cal Turner Jr., Dollar General's goal is to increase its sales per sq. ft to $200, up from $141. To do that the retailer will have to increase productivity of the floor space devoted to apparel and do a better of job of replenishing the stores.

Soft lines account for 35% of selling space in a typical 6,000-sq.-ft. to 8,000-sq.- ft. Dollar General store but last year generated only 18% of its annual sales of $2.6 billion. The additional distribution center capacity is needed to catch up with past growth.

At the end of its fiscal year Jan. 30, Dollar General operated 3,169 stores, 1,225 of which were opened in the past three years. It spent $107 million to open 468 stores last ear alone and plans expenditures of $100 million to $125 million to open another 500 to 525 units during the current fiscal year. Beyond that, store square footage is expected to increase 15% annually, indicating by 2000 an average of two new stores will be opening every day.

"Our growth has created great demands on the company," Turner told Discount Store News at the retailer's shareholders meeting.

Supporting its base of stores became more difficult last year when stores were reset to make room for 700 fast-turning consumable products. The impact on Dollar General's already strained network of four distribution centers was dramatic. The program was so popular with customers that Dollar General couldn't keep shelves full, and its in-stock position dropped to 80%. It has since improved to 89%, and Turner said the goal is to get it to at least 95% this year.

A new DC opening in July in Indianola, Miss., should help, as should expansions to existing facilities and the opening of two new DCs in the next 18 months.

"Distribution is holding us back," Turner said. "We are jump-starting our DC abilities, and in the next 18 months we will double our existing capacity."

Eventually, Dollar General plans to operate a network of nine to 11 DCs and believes it can double its store count without venturing outside of the existing 24 Southeastern states in which it operates. The company is also a year away from moving into new corporate offices that will consolidate headquarters functions in one building.

The additional DC capacity will be sorely needed if a new apparel program proves successful. Arriving in stores during the next several weeks is a 383-sku apparel program similar to the fashion basics concepts employed by The Gap. Dollar General management expects the products to be popular with its extremely cost-conscious customers. And before merchandise had even arrived in stores there were concerns about keeping it in stock, especially with Back-to-School season approaching.

The line consists of five items; T-shirts, casual slacks, collared shirts, jeans and shoes. Everything is priced under $10, and samples shown to Discount Store News indicate the merchandise is quality-oriented. T-shirts are all-cotton Jerzees brand, priced at $5. Collared shirts under Dollar General's Crossbow brand are available in blends and all-cotton, priced at $5. Slacks retail at $10 and are also available in blends and all-cotton. Dollars General's Open Trails jeans are priced at $10 for adults and $7.50 for kids. Athletic shoes are under the Chic brand for women and the Dunlop brand for men and kids. They are priced at $10.

The new merchandise will supplement the retailer's existing apparel offerings, which include hosiery, undergarments and infants.

"We realized our customers aren't walking around naked, and we shouldn't send them somewhere else for basic clothing," Turner said.

Dollar General's in-stock concerns for the new line are justified based on the quality and price of the merchandise, anticipated demand and last year's distribution difficulties.

A major difference this year is that the company will have data enabling it to more quickly respond to sell-through on different items. Point-of-sale scanners were added to all stores last year for the first time. In addition, this year electronic data interchange is being implemented with 1,000 key vendors, and the logistics personnel of 50 of the retailer's top vendors are being consulted on ways to achieve supply chain efficiencies.

Dollar General has a full agenda, and as Turner quipped at the meeting, "I walked around tired all last year thinking about how hard everyone was working."

If that's the case, he should be exhausted by the time next year's shareholder's meeting rolls around.