Dollar Stores Get Another Boost From Pandemic Shopping Habits In Q2

Like Walmart, Target and other general merchandisers, the dollar stores have seen surges in demand as consumers consolidate their shopping trips and avoid malls and other retail areas. 

Dollar General saw less traffic at its stores, but high ticket values more than made up for it. Sales of more non-consumable products, as well as higher markups, helped boost profit margins along with sales even as higher distribution costs cut into gross profit. Dollar General also took on incremental costs related to COVID-19, including increases in employee compensation, but those too were offset by the spike in sales. 

Neil Saunders, managing director for GlobalData Retail, pointed out that Dollar General benefited from more consumers staying at home and not dining out, which helped increase the volume of food sold at the dollar store retailer, while less leisure and work travel means shoppers are hitting stores closer to home more. That plays right to Dollar General's benefit, given its 17,000 stores around the country.

Dollar General expects to expand DG Fresh to 14,000 stores by the end of 2020, up from 12,000 at the end of Q2, CEO Todd Vasos said Thursday during an earnings call. The company has a goal of being able to handle the distribution of perishables essentially on its own by the end of 2021, according to Vasos.