Dollar General Case Study

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Table of Content

EXECUTIVE SUMMARY 2

1. Background 3

2. Dollar General diagnosis 4

a. Financial analysis 4

b. Strengths and weaknesses analysis 5

3. External Analysis 7

a. Competitors 7

b. Opportunities and threats analysis 8

4. Problem identification 10

REFERENCES 11

EXECUTIVE SUMMARY

Dollar General is a retailing company, especially extreme value oriented.

Since its establishment in 1955, Dollar General has drastically grown. In 10 years, from 1955 to 1965, the Company grew to 255 stores with annual sales of $25.8 million. Today, Dollar General owns 6,300 stores in 27 states, with 2002 annual sales of $6.1 billion and more than 54,000 employees. This growth was extremely fast in the 1990's. The number of stores grew so from 1,461 in 1991 up to 6,113 in 2002.

Since the beginning, Dollar General takes advantage of a niche by setting up profitable small stores delivering convenience and value. All the Dollar General's Strategy is based on a customer-driven distribution of consumable basics.

Financial situation of the Company remains really satisfying in spite of shareholders lawsuits due to restatement of its earnings few years ago. Revenue growth was equal to 12.6% in 2003 for a total amount of $7.24 billion. Its net income was the largest of the sector with $319.9 million. In the same time, and over the last three years, the Company has reduced its long-term debt by $448 million.

Such a success can be explained by a really good positioning of the Company through its external environment and among its direct competitors. Dollar general knows very well how to manage the exploited niche and its opportunities. The main strength of Dollar General remains its ability to constantly open new stores, knowing that the key success holds in the proximity of small stores delivering convenience and value. It is in fact a kind of necessary comparative advantage on this market.

The new CEO, David Perdue has got no experience of retail industry. He has to choose in which direction Dollar General will go. He has to go on the expansion of the Company but with the arrival of new and very powerful competitors such as Wall-Mart or Kmart.

1. Background

Dollar General is a discount retailer of general merchandise, with around 6,300 discount stores in over 27 states in 2003. The Company, which headquarters are based in Goodlettsville, Tennessee engages in the provision of general merchandise at low prices, serving customers in Midwestern and Southeastern US.

The Company offers its customers an assortment of consumable basic merchandise, which includes: health and beauty aids, packaged food products, cleaning supplies, hardware, stationery, household items and basic apparels. The majority of its items are priced at $1. The Company employed around 54,000 employees. Their buying staffs negotiate low purchase prices from suppliers. It purchases its merchandise from various major suppliers. To maintain high in stock levels of core merchandise, the Company usually limits its stock-keeping units per store.

Timeline

In 1939, with only a third grade education, J.L. Turner formed his own company in Scottsville, Kentucky, with his son, Cal.

In 1955, Cal Turner and his son Cal Turner Jr. opened the first Dollar General store in Springfield, Kentucky.

In 1965, they operated in 255 stores and generated $25.8 million of sales.

In 1976, Dollar General exceeds annual sales of $100 million for the first time.

At the beginning of the 1990s, the Company's annual sales kept increasing and began to expand store sizes from 5,000 square feet to 6,800 square feet.

In 2000, Dollar General's corporate employees move to Goodlettsville, Tennessee. The move also saw the most aggressive store reset in the Company's history, in which, more than 5,000 stores were set.

In 2001, the Company began offering perishable products. This program included a selection of dairy products, meats, frozen foods...
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