Dollar General to Remodel Smaller Stores

Dollar General Corp. (Goodlettsville, Tenn.) has said it will institute a “lifecycle remodeling” program for its smallest stores, rather than expanding, closing or relocating them.

Chairman and ceo Rick Dreiling told investors that the plan is essentially renovating and refocusing the more productive 5700-6500-square-foot units in the chain.

“They’re in keeper sites now, and we don’t have the opportunity to expand them,” said Dreiling, “so we’ve done some experimentation working with a smaller store – going in and refreshing it and making the commitment to the right categories that are there rather than trying to play in every category – really focusing on those that are most productive.

“It’s costing us about 30 percent less to remodel them, and they’re generating a return that’s 25-40 percent higher.”

Dreiling said the cost-containment initiative will extend to leveraging category management and making more efficient use of labor. In particular, he said, the focus is on “SKU productivity.”

“We believe we can do more in 2014 with less SKUs. We’ve examined a lot of categories, and we have discovered there are categories we can expand and categories we’re going to contract.”

One category being contracted is health and beauty care. The discounter eliminated 300 SKUs in the category late last year, with another 300 scheduled to be eliminated this year.

“This is an area where we may have overestimated our customers’ willingness to purchase these higher-ticket items and underestimated the risk of shrinkage,” Dreiling explained.