Discounter Dollar General is joining the ranks of other retailers in closing some urban locations, with plans to shutter roughly 100 namesake stores as it looks to optimize its footprint.
The Goodlettsville, Tennessee-based company, which has about 20,600 stores, said it will close 96 Dollar General locations in the first quarter of fiscal 2025. In addition, the retailer will shutter 45 PopShelf stores — which offer discretionary products — and convert an additional six of them to Dollar General stores.
Dollar General conducted a review of its real estate portfolio in the fiscal fourth quarter, which entailed evaluating individual store performance, expected future performance and operating conditions, among other factors. The nearly 100 namesake locations slated to close represent less than 1% of the retailer's store base, CEO Todd Vasos said during an earnings call Thursday.
"Those stores, many of which are in urban locations, have become increasingly challenging to successfully operate," he said. "These stores likely would have been closed in the ordinary course of the store's life cycle when their lease has expired. However, we determined that closing these locations now will allow us to optimize our allocation of resources going forward."
Retailers such as discounter Target, pharmacy chain Walgreens, and department stores, including Macy's are among those that have already or are planning to close locations in cities. In places like San Francisco and Chicago, retailers said they were shutting underperforming stores. Those are also cities that have been plagued by crime and theft.
Openings still planned
Vasos was asked for more specifics about the Dollar General closings.
"They were predominantly in urban and metro settings where it has become very, very difficult, to run a profitable store for a lot of different reasons that, obviously, have been out in the news for many years," he said without elaborating.
The announced closings don't mean that Dollar General will stop expanding. It intends to open 575 stores this year.
"We still believe there's a lot of runway for growth, you know, within the continental United States, not to even mention Mexico," Vasos said.
Dollar General's strong suit has always been rural markets, according to Neil Saunders, a retail analyst and managing director of analytics firm GlobalData.
"Many of the locations being closed are not delivering as they should," he said in an email to CoStar News. "It is interesting that many of them are in urban areas where competition is a little more intense and the audience isn’t quite so captive. Where Dollar General works best is in more rural areas where they are one of the few names in town. Here they drive customers through convenience as well as low prices."
Dollar General declined to comment on Saunders' remarks.
PopShelf testing
The chain's PopShelf stores sell nonconsumable items like seasonal and home decor, rather than essentials like groceries, and are aimed at higher-income shoppers than Dollar General. With the closings, PopShelf will be left with 180 stores, according to Vasos. Some PopShelf stores are seeing double-digit sales growth, but the concept needs work, he said.
"We tested the outer limits and bounds, in many instances ... to put [up] a PopShelf store," Vasos said. "And some worked really well and some didn't work as well. ... So those are the ones that we're closing down."
Dollar General's fourth quarter operating profit included charges of $232 million, primarily due to the store closures as well as PopShelf impairment charges.
This earnings season a variety of retailers have discussed slowdowns in consumer spending amid concerns about the economy. Dollar General is no exception.
"Our customers continue to report that their financial situation has worsened over the last year as they have been negatively impacted by ongoing inflation," Vasos said. "Many of our customers report that only have enough money for basic essentials with some noting that they have had to sacrifice even on the necessities."
In the fourth quarter Dollar General's net sales rose 4.5%, to $10.3 billion. Same-store sales increased 1.2%.