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Dollar General, Family Dollar Show No Signs Of Letup

They don’t grab headlines with celebrity chefs, designer pop-up shops and former Apple executives. Instead, Dollar General and Family Dollar make news where it counts the most: on their balance sheets.

Both of the nation’s top convenience discounters beat analyst earnings estimates with their quarterly results announced in late March. Family Dollar posted a 10.7% year-over-year net income gain for its fiscal second quarter on an 8.6% net sales gain, including a 4.5% same-store increase. Dollar General, meanwhile, registered a whopping 31.3% year-over-year net income increase in its fiscal fourth quarter on a 20.1% net sales increase, including a 6.5% same-store jump.

Wider Audience

The growth of Dollar General and Family Dollar that was turbocharged by the downturn shows no letup as the economy improves. These retailers are positioned to capture a bigger share of their core lower-income customer bases, plus a thicker slice of an expanding middle class that has become more inclined to the handy discounts the stores purvey. 

Aggressive expansion is introducing Dollar General and Family Dollar stores to a wider consumer audience. With long-established rural and urban store foundations, both operations in recent years have opened numerous suburban locations straddling broader demographics.

Dollar General plans 625 new stores this year (store number 10,000 recently debuted) with about 80 coming in new company markets, including California, Nevada, Connecticut, Massachusetts and New Hampshire. Family Dollar plans as many as 500 new stores in its fiscal 2012, bringing its total to some 7,500 outlets. Both chains are driving full throttle into California, where each has some 50 stores slated to open by the end of the year.

In The Neighborhood

The cost-efficient neighborhood location strategies of the two chains try to keep their distance from direct big-box competition. Still, Dollar General and Family Dollar have never been better positioned to take share from their super-strip-center rivals. 

Their convenient, small-box formats also should serve them well in some outer urban neighborhoods poised for revival as young home starters seek affordable housing.

And while some of the largest discounters and other big-box retailers have made dramatic adjustments in efforts to attract new consumers, rekindle sales growth and protect gross margin, Family Dollar and Dollar General have expanded successfully without a major reinvention of their core merchandising concept: well-edited selections of high-need consumables and household basics at best-value pricing.

Housewares Opportunity

Solid same-store growth indicates their merchandising strategies are far from stagnant. Each is investing heavily in remodeling programs to improve the shopping experience. And each has expanded selections in key traffic-driving categories in an attempt to command a bigger share of their customers’ wallets.

Private labels are increasing their facings inside Dollar General and Family Dollar stores. However, the promise of convenient, unmatched value on a wider scope of branded goods could be central to the chains’ success at inviting and sustaining a broader customer base as the overall economy improves.

It adds up to a blossoming opportunity for housewares companies that can develop programs tailored for this expanding channel and its expanding customer base.

Selling to or competing against Dollar General and Family Dollar shouldn’t be an afterthought. They might not boast the biggest celebrity chefs, the hottest designers or a former Apple executive. They just keep getting bigger. 

That warrants a banner headline in today’s retail market.