March 25 - Dollar General sees its strategy of $1 per item bringing in more shoppers, resulting in stronger sales growth this year, led by lower cost tobacco products, despite concerns about the economy. Conway G. Gittens reports.
The Daily Digit is $1. That's how much you will blow at the U.S. chain of variety stores Dollar General, on average. The company prices about 25 percent of its merchandise at $1 or less, and the rest below ten bucks. It works. Dollar General's fourth-quarter profit came in well ahead of Wall Street expectations despite lighter-than-anticipated sales growth. The reason - The so-called dollar store is testing sales of tobacco products and is seeing better-than-expected demand. Also, the stores that are selling the tobacco products are seeing higher foot traffic compared to other locations. Analysts are taking notice of that success. They say that, while the overall sales growth "was a bit weaker than forecast, the company more than made up for this through a better-than-expected gross margin." Dollar General normally does well when economic concerns push consumers on limited budgets to cut spending. But recently it's been under pressure from competitors led by Wal-Mart that are now focusing on cheaper products. But it looks like Dollar General is up for the challenge. The company sees its sales growth stronger than in 2012, mainly from increased demand for food and other basics despite consumers' concerns about the economy. Dollar General has strategically located its more than 10,500 stores in rural and urban parts of the United States, which means its stores are more convenient than big-box retailers such as Wal-Mart, as low-income shoppers look to chop their gasoline bills.