Dollar General will open 900 new stores next year


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Dollar General is resisting the retail trend.

The discount chain announced on Thursday that it plans to open 900 new stores in 2018 for the second year in a row. Dollar General did not say how many new jobs vacancies could create.

"Our first priority remains to invest in new stores where we continue to see high returns," finance manager John Garratt said in a call with investors.

Dollar General has become a staple of purchases across the country. It currently has more than 14,000 stores in 44 states, an increase of 35% over five years ago.

By the end of the year, more than three in four Americans will live less than 5 miles from Dollar General, the company said on the call.

Dollar stores are one of the few retail groups that are thriving. Many traditional brick and mortar stores have been overshadowed by the growth of electronic commerce.

The shares of Dollar General ( DG ) have risen 25% this year. Dollar Tree ( DLTR ) its main discount competitor, has increased by 38%.

Dollar General has been successful thanks to its lean business model, said GlobalData Retail badyst Neil Saunders. Its smaller stores sell cheap commodities on a day-to-day basis, especially in rural areas, where it does not make sense for Walmart or other large stores to open their doors.

"The company [is] the nearest and most convenient general merchant for millions," said Saunders.

Sales increased 4.3% last quarter at stores that opened a year ago, a sign of retail health. Last quarter's revenue soared to $ 5.9 billion, an 11% increase from last year, in part due to hurricane-related spending in Texas and Florida.

More middle-income and affluent buyers are helping to raise Dollar General's overall sales. The expansion, especially in metropolitan areas, will allow it to continue reaching these buyers, said Saunders.

But low-income Americans are still the store's main customers. The stores attracted buyers during the economic recession of 2008 and 2009, and consumers have not stopped returning since then, even when the economy has taken hold.

Analysts expect Dollar General's execution to continue as government benefits to help poorer Americans, such as Medicaid and food stamps, remain stable.

"A reduction in social benefits, such as food stamps, and an increase in health care or housing costs may continue to be an obstacle for Dollar General's customers," said John Bruck of Morningstar.

CNNMoney (New York) First published on December 7, 2017: 5:13 PM ET

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