Dollar General is looking beyond the buck, the discount chain said Thursday, as soaring shipping and labor costs make it harder to wring profit out of one greenback.
Now, Dollar General says it will open a new retail concept targeting wealthier communities where most items will sell for around $5 or less — giving the chain more room for profit as inflation stays stubbornly stuck at 30-year highs.
You could say Dollar General is going after wealthy suburban moms: Its new outlets, called Popshelf, debuted in test markets last year. They’ll now be rolled out across the country with 1,000 stores in prosperous areas where the annual household income is as high as $125,000, the company said Thursday.
The typical Dollar General customer at one of its traditional dollar stores lives in a rural area and has an average income of about $40,000, the company said.
The announcement of the new concept came as Tennessee-based Dollar General said its annual profit would likely fall below expectations, sending its stock tumbling by nearly 4 percent in early trading to $214.29 a share.
The wooing of more affluent customers is an acknowledgement that Dollar General’s core, lower-income customers have been stretched to their limit as inflation hits their wallets hard, particularly rising fuel prices. The annual inflation rate hit 6.2 percent in October as measured by the Consumer Price Index, its highest level in more than 30 years.
“Given the sustained and positive performance of our Popshelf concept, we plan to further accelerate the pace of new store openings as we move ahead,” Chief Executive Todd Vasos said in a statement, noting the stores should be mostly open by the end of the 2025 fiscal year.
There are currently about 36 Popshelf stores — out of 17,683 Dollar General locations in the US — that sell home decor, seasonal products, beauty and cleaning supplies, along with party goods. There, shoppers can find a 10-piece mixing bowl set for $5, decorative pillows for $10 and “modern gold” table-top lamp that sells for $10.
The new concept comes amid a broader push by the other massive discount chains to raise their prices — in large part because of inflation pressures and rising labor costs.
In November, Dollar Tree said it is testing higher prices by as much as $1.50 in its 7,900 US stores. The Chesapeake, Va.-based company also operates Dollar Tree Plus sections in its stores, which were already charging $3 to $5 for merchandise.
Meanwhile, Dollar General on Thursday also said it will open its first stores outside the U.S. next year, 10 stores in Mexico.
But the discounter has taken its lumps during the pandemic as supply chain and inflation pressures slam its margins.
Its sales increased 3.9% to $8.5 billion in the third quarter of 2021 compared to $8.2 billion over the same period last year while its profit margin was 30.8% in the third quarter of 2021 compared to 31.3% in the third quarter of 2020, the company said.