By Sarah Nassauer
Dollar General Corp. said quarterly sales rose at the fastest pace in nearly three years, a sign that the discount chain continues to find pockets of cash-strapped consumers by opening hundreds of new stores, many in rural areas.
Sales in existing stores rose 4.3% in the quarter ended Nov. 3, as more customers visited its small, convenient stores where they spend on average $12 per trip.
The Goodlettsville, Tenn.-based retailer confirmed it plans to open 1,285 stores in fiscal 2017, and 900 stores next year. Dollar General will also remodel 1,000 older stores, modernizing and adding refrigerated coolers to sell more fresh food and more space for health and beauty products.
Stores with more cooler space receive one additional trip per shopper on average, said Chief Executive Todd Vasos on a call with investors. "All ships in the harbor, if you will, rise within those remodels," said Mr. Vasos.
The retailer's stock rose 2% to $92.71 in mid-day trading. The shares have gained 25% so far this year.
Dollar General's rosy earnings report was similar to that of competitor Dollar Tree Inc. two weeks ago, as the small format chains, often located closer to shoppers than big-box competitors or traditional grocery stores, continue to appeal to budget-minded customers. Dollar Tree's sales in existing stores rose 3.3% in the most recent quarter.
Dollar General has grown rapidly in recent years, in part by opening thousands of stores in mostly rural areas to access more of its core shoppers: households that earn $40,000 a year or less.
With around 14,000 stores in the U.S., that strategy has proved fruitful, even as the economy grows, because rural communities have recovered more slowly than metropolitan areas.
On Thursday, Mr. Vasos said Dollar General will work to reach more urban customers as well.
"We are seeing that our brand is resonating in geographic areas that are new to us, as some of our highest sales performance is coming from areas where we historically have not had a presence," he said. "We anticipate that 75% of the U.S. population will be within five miles of a Dollar General by the end of fiscal 2017."
Net sales increased 11% to $5.9 billion during its third quarter. Profit rose 4.3% to $252.5 million. The company now predicts net sales will grow 7% this fiscal year, up from a previous forecast of 5% to 7%.
--Imani Moise contributed to this article.
Write to Sarah Nassauer at [email protected]