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Dollar General beefs up profit

Tuesday, June 02, 2015 - 01:23

Quarterly profit rose nearly 14 percent as the discount store chain sold more discretionary goods like apparel and housewares. Fred Katayama reports.

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More shoppers spending more money boosted quarterly sales at Dollar General. Its price-sensitive shoppers picked up tobacco and healthcare items, among other things. Profit shot up nearly 14 percent as the company sold more apparel and housewares - discretionary goods that carry fatter margins than consumables. And it shrank its transportation costs. RBC Capital Markets analyst Scot Ciccarelli said, "...The company posted very balanced sales growth between consumables and discretionary. If this balance remains, it will likely provide an incremental boost to gross margins beyond current expectations." Dollar General seems to be doing fine without Family Dollar, the rival discount store chain it tried to acquire but lost to Dollar Tree in the bidding war in January. Since then, it has aggressively pursued a growth strategy. To take on its expanded rivals as well as the new smaller format stores from Wal-Mart and Target, Dollar General added 219 stores in the quarter, part of its plan to grow its store network by 6 percent this year. And it's beefing up its profit margins by expanding its private label brands. Dollar General sees sales and operating profit rising up to 9 percent this fiscal year. Investors liking what they see, pushing the stock higher in early trading.

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