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E-commerce may be getting a lot of buzz with major chains like Macy’s, (NYSE:MC), Staples, Inc.  (:SPLSN/A), Kohl’s Corp. (NYSE:KSSC), and Wal-Mart Stores Inc. (NYSE:WMTC) expanding their online presence while simultaneously closing brick-and-mortar locations, but one retailer is expanding its physical footprint in a major way.


Retail


Last week Dollar General Corp. (NYSE:DGC) said it planned to open 900 new stores this year alone. The company followed up with an announcement it would build an additional 1,000 locations in 2017. If all plans go through, the grand total will be almost 15,000 Dollar General locations by the end of next year.

Small But Mighty And Growing

Compared to the 130,000 square-feet of retail space occupied by a typical Macy’s, Dollar General’s 7,400 square-feet footprint seems puny. On the other hand, DG just completed its 26th straight year of same-store sales increases. Macy’s would love to have those kinds of stats.

Other “dollar” chains in the space have also done well – especially since the end of the recession. Dollar Tree, Inc. (NASDAQ:DLTRC) and Family Dollar (currently owned by Dollar Tree), became even more popular as consumers rushed inside for no-frills bargains.

It’s All About Stagnant Wages

Much has been made about the lack of growth in worker wages in recent years. It’s been a hot-button topic among politicians and Dollar General has been paying attention.

Dollar General EVP and CMO, James W. Thorpe said, “Wages have simply not kept up with rising consumer prices, and negative income growth is projected to continue through 2020 for the core Dollar General customer earning less than $50,000.”

Opportunity For Growth

Dollar General CEO, Todd Vasos ticked off the numbers. Dollar stores account for 5% of all retail market share, he said. Dollar General’s take is 2.8% or 56.5% of all dollar-store purchases.

“The customer comes to us quite often,” Vasos said, pointing out that Dollar General has a 20% share-of-wallet for paper goods and chemicals. “As you start to look at other core categories — health and beauty, food, candy and snacks and perishables,” Vasos added, “you can see the opportunity [to increase sales] is great.”

Dollar General expects the growth to continue, targeting annual sales growth of 7% to 10%, with earnings per share growth of 10% to 15%.

Analysts Weigh In

Jim Cramer’s TheStreet rates Dollar General A+ (Buy) saying it expects the stock to outperform the majority of stocks rated by TheStreet. Specific positive areas cited include revenue growth, solid stock price performance, growth in earnings per share, good cash flow from operations and a solid financial position including reasonable debt.

Stiffel recently raised its price target on DG to $110 from the previous $90. Zacks rates the stock a “Buy” and TipRanks analysts rate it a “Strong Buy.”



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