Beaten Down Stock Dollar General Overhauls Supply Chain To Boost Margins: Report

Dollar General Corp DG reportedly aims to reduce the variety of products it carries and control the quantity reaching its shelves as part of a broader strategy to enhance efficiency and reduce theft across its more than 20,000 stores.

Goodlettsville, Tennessee-based Dollar General is restructuring its distribution network and changing warehouse sorting processes to speed up the flow of goods to its stores, the Wall Street Journal reports.

The report cited logistics expert Tom Goldsby from the University of Tennessee, who noted that reducing inventory and product assortment can free up cash and simplify supply-chain operations.

Dollar General plans to eliminate 1,000 products this year, particularly those classified as high-shrink items prone to loss or damage. This approach is part of the company’s efforts to combat shoplifting, which has increased since the pandemic and affected profit margins.

The retailer’s number of stores has grown from about 15,000 in 2019 to over 20,000, and it plans to open approximately 800 more this year.

In May, Dollar General reported first-quarter fiscal 2024 sales growth of 6% year-on-year to $9.910 billion, beating the analyst consensus of $9.897 billion. Same-store sales increased 2.4% year-on-year. EPS of $1.65 beat the analyst consensus of $1.56. Dollar General expects second-quarter sales growth in the low 2% range.

Analysts have mixed views on Dollar General, noting strong sales and strategic initiatives but highlighting challenges like shrink and emerging risks affecting future growth.

Dollar General stock lost 24% in the last 12 months. Peer dollar store Dollar Tree, Inc DLTR lost over 28% as rising inventory levels, and shrink take a toll.

Price Action: DG shares closed lower by 1.21% at $128.54 at Tuesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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