Tuesday, April 10, 2012

Dollar General's California Dream Becoming Reality

Tennessee-based discount retailer Dollar General has been moving hard and fast in Northern California, particularly in the Central Valley, since we first revealed the discount retailer's big plans for the market region in this December 5, 2011 story: Dollar General Jump-Starts California Launch: Taking Over 5 Centro Mart Supermarkets For Early 2012 Openings.

In the mere four months since we published the report, Dollar General has hit the ground running, focusing on its Dollar General Market grocery stores and traditional dollar format stores in the region.

Below is what the mega-discount retailer, which operates 10,000 stores in 39 U.S. states, is up to:

>First store opened: Dollar General opened its first Dollar General Market grocery store in the region March 31, at 1729 West Highway 140, in Merced, California.

The grocery market was store number 10,000 for Dollar General, and it went all out for the grand opening, offering activities for shoppers including: a free make-up consultation from representatives of  L’Oreal and Maybelline; photographs for the kids with characters Sponge Bob, Bimbo Bear and the Energizer Bunny; and food sampling, offering numerous products sold at Dollar General. Additionally, the first 500 customers to arrive at the store for the 9 a.m. grand opening received a free ham and a reusable tote bag filled with product samples and coupons

>Store manager search: The retailer is currently advertising for store managers for its three Dollar General Markets in Stockton, California and the unit in the East Bay Area city of Brentwood. These are four of the five stores Dollar General is leasing from Stockton-based supermarket chain Centro Mart, as we detailed in our December 5, 2011 story. The fifth former Centro Mart unit, in Stockton, will be a Dollar General dollar format store. The four Dollar General Market grocery stores and the dollar store are set to open in the coming weeks.

>Regional director wanted: Dollar General is advertising for a regional director for its dollar stores and Dollar General Market stores for California and Nevada.

According to our sources, the retailer plans to open 150-200 units combined of both formats in California and Nevada over the next two-to-three years.

So far Dollar General has seven stores open in Nevada and six units in California. Dollar General CEO Rick Dreiling said in a March 22, 2012 conference call with financial analysts that the retailer plans to have 50 (grocery stores and dollar stores combined) units open and operating in California by the end of the year.

>More stores: In our December 5, 2011 story we reported Dollar General had plans to open numerous other Dollar General Market (which offer groceries along with perishables, fresh meat and produce) and dollar store units, which carry perishable and dry grocery consumables along with general merchandise items but not meat or produce, throughout Northern California, with a major focus on the Central Valley.

Above: The location of the Dollar General Market in the Gregory Gardens shopping center, Modesto, California.

Thus far we've discovered the following planned Dollar General Market grocery store units in the region: two units in the Fresno area, at Fruit and McKinley in Fresno and Bullard and Minnewawa in nearby Clovis (both are former Save Mart supermarkets which the Modesto-based chain had previously closed); a Dollar General Market in Modesto, in the Gregory Gardens shopping center at 2003 Tully Road, between Bowen and Briggsmore (the retailer has also signed a lease for a dollar format store at 510-560 North Main Street in Modesto); and a Dollar General Market in Winton, which is next door to Merced, where the first store in the region opened March 31.

Dollar General is currently advertising on a variety of online job sites for managers for the Modesto and Winton grocery markets, which are set to open in the coming weeks.

Distribution center

As we reported in our December 5, 2011 story, Dollar General has established a distribution center near Bakersfield, California to service its grocery and dollar format stores in California, Nevada, Arizona and New Mexico. The facility opened this month.

Major growth plans

Dollar General plans to open approximately 625 new stores this year, the majority of which will be its flagship dollar format stores, which average about 7,000 square feet, CEO Dreiling said in the March 22 conference call. Additionally, according to the CEO, the retailer plans to remodel and relocate about 550 stores in 2012.

The retailer opened 625 new stores in 2011, along with remodeling or relocating 575 units, for a net increase in square footage of 7%, Dreiling said.

Dreiling said in the March 22 conference call that Dollar General has about 40 new Dollar General Market grocery stores set to open this year, the majority of which will be in California, Nevada and Arizona.

Last year the retailer opened seven new Dollar General Market stores, seven of which were in Nevada (its first new market since 2006), and remodeled 25 existing grocery markets.

There are currently 70 Dollar General Market grocery stores in the U.S.

The grocery stores, which average 10,000-15,000 and offer a selection of grocery items, perishables, frozen foods, produce, meats and general merchandise, are a key element of Dollar General's strategy for California.

Part of that strategy is to focus on food deserts, regions and cities that are currently underserved by grocery markets offering fresh food and groceries at reasonable prices.

The Dollar General Market format is focused on everyday low prices. A number of industry surveys, for example, put the store's prices on par with Walmart for fresh food, groceries and general merchandise items. Dollar General also runs weekly ads for the grocery markets and sometimes offers store coupons, such as $5 off purchases of $25 or more.

Inside a new generation Dollar General Market. [Photo credit: Dollar General, 09/27/11.]

Good fiscal 2011

Dollar General had a good 2011 fiscal year on all metrics. Its full-year sales increased 13.6% to a record $14.8 billion. There was an extra week in the fiscal year. Excluding that 53rd week, full-year sales increased to 11.4%.

Sales-per-square-foot for fiscal 2011 increased to $209, compared to $201 a year ago. Average sales-per-store came in a bit over $1.5 million.

The 2011 fiscal year also marked the 22nd consecutive year of same-store-sales growth for Dollar General. Same-store-sales were up 6% for the year, with all regions reporting positive comps, according to CEO Dreiling. Dollar general is forecasting a same-store-sales increase of between 3%-5% for the current fiscal year.

Dollar General's adjusted operating profit grew 17% in 2011 over the previous year to a record $1.5 billion and a record 10.2% of sales.

The retailer posted a 31.7% gross margin rate for 2011, which was 31 basis points below the previous year but was 246 basis points higher than in 2008, the first full year of the "great recession."

On the bottom line, Dollar General's adjusted net income increased 26% over 2010, which is an impressive performance.

Dollar General also launched and e-commerce website in 2011, which will not only bring it added revenue but should prove to be a good source of data over time. For example, the retailer is currently in 39 states. Purchasing data from the site over time could prove valuable as Dollar General looks at which of those remaining states it wants to open stores in first.

A closer look inside the Dollar General Market. [Photo credit: Dollar General, 09/27/11.]

Dollar General's impact

It's difficult to forecast whether or not Dollar General will be a major player in the food and grocery retailing business in California in general and in the Northern California/Central Valley region specifically for a couple reasons.

First off, selling food and groceries isn't something the retailer has a solid track record of doing. In fact, a couple years ago Dollar General considered shuttering its Dollar General Market format and stores completely. However, it instead developed a new Dollar General Market prototype in Dallas, Texas, which is the model for the remodeled and new stores, and is going forward with the chain, including emphasising the grocery markets as part of its two-format strategy in California and Nevada, as previously noted.

Second, California has no shortage of seasoned grocery chains and independents, with more coming, like Walmart with its Neighborhood Market supermarkets (see the story link at bottom), for example. But Dollar General's focus on undeserved regions and cities in the Golden State, such as the locations in the Central Valley detailed earlier, could be a very smart move for the retailer with its Dollar General Market stores, which have a low everyday price focus.

For example, Tesco's Fresh & Easy Neighborhood Market, which continues to lose millions of dollars a week with its 10,000 square-foot grocery markets, isn't opening any new stores in California's Central Valley despite having numerous sites in cities like Bakersfield, Fresno, Modesto, Los Banos and Stockton, most of which its been sitting on for three to four years.

Fresh & Easy did finally open its first five stores in Sacramento (see story links at bottom), where Dollar General also plans to open a number of its grocery markets and dollar stores (the first unit we've discovered will be in the Grand Oaks shopping center at 7963 Auburn Boulevard in the Sacramento suburb of Citrus Heights), in March. Tesco now has 196 Fresh & Easy stores. There are 142 units in California, 24 stores in Arizona and 20 units in Arizona.

Dollar General's two-format - the grocery stores and dollar stores - strategy in California should be a powerful one though, allowing it to establish its brand in the Golden State (and in Nevada) much faster than if it was only going with a single-format approach. For example, the dollar format stores also offer a considerable selection of groceries and general merchandise items, along with some perishables and frozen foods (two categories Dollar General is expanding in the stores), which should allow the retailer to establish itself in the highly competitive Golden State faster than if it were doing a single-play strategy only.

We'll keep you updated like only Fresh & Easy Buzz can on Dollar General's march through California, which is just getting started.

Related Stories

December 5, 2011: Dollar General Jump-Starts California Launch: Taking Over 5 Centro Mart Supermarkets For Early 2012 Openings

April 3, 2012: Getting Real in the Golden State: First Group of 13 Walmart Neighborhood Market Stores Opening in California This Fall

March 9, 2012: Scoop Confirmed: Sprouts Announces Acquisition of Sunflower Farmers Market

February 9, 2012: Confirmed: First 2 Fresh & Easy Stores Open in Sacramento March 7; 3 in Metro-Area March 14

January 18, 2012: Fast-Growing The Fresh Market Chain On Track to Launch in California This Year

August 29, 2011: Meaningful Move or Too Little Too Late? Fresh & Easy Neighborhood Market Planning Early 2012 Metro Sacramento Market Launch

August 3, 2011: Fast-Growing Specialty Grocer The Fresh Market Targeting Mid-2012 For First California Store

August 31, 2011: Tesco Says Sayonara to Japan, Good Morning to Sacramento

Tuesday, April 3, 2012

Getting Real in the Golden State: First Group of 13 Walmart Neighborhood Market Stores Opening in California This Fall

Walmart Neighborhood Market in California

We first reported in this July 2010 story [July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store] that Walmart Stores, Inc. was looking for locations in California for its Walmart Neighborhood Market supermarkets, which range in size from about 30,000-45,000 square feet.

To date Walmart has operated its mega-supercenters and discount format stores only in California, many of which it's been converting over the last few years to hybrid supercenters offering food and groceries, but not its Neighborhood Market grocery stores.

We followed our July 2010 report and analysis piece up with other stories, like this one in January 2011 about the Bentonville, Arkansas-based global retailer's plans to launch its Walmart Neighborhood Market format in the Golden State. In the January piece and in others, we reported on specific locations in California where Walmart would be opening its Neighborhood Market stores.

It's been a long reportage road from our first reports in 2010 about the mega-retailer's plans to open Walmart Neighborhood Market supermarkets in California to the present.

But it's been a fruitful journey.

Why? Because Walmart Store's, Inc. has now announced - and in our case confirmed because many of the store locations it's announced are those we already reported on - the first Walmart Neighborhood Market locations it plans to open, beginning this fall, in California.

Inside a Walmart Neighborhood Market supermarket. Photo courtesy Walmart Stores, Inc.

Below are the locations of those 13 (Walmart obviously isn't superstitious) supermarkets, along with all the key data grocery industry wonks and consumers alike like to see.

Walmart has other Neighborhood Market locations already booked in California, a couple of which are mentioned in our previous stories. In addition, the retailer is looking for more sites for its Walmart Neighborhood Market supermarkets throughout California.

We will be writing about Walmart's launch of its Walmart Neighborhood Market supermarkets in California from now until the end of the year, including reporting on some of those additional locations.

We'll be using this header: 'Walmart Neighborhood Market in California,' in those stories.

As of today we expect the first Walmart Neighborhood Market stores in California to open in the October-November time period. One of the first, if not the first unit, will be in Lincoln, California near Sacramento, where Tesco's Fresh & Easy Neighborhood Market opened a store in March 2012.

Walmart Stores, Inc. currently has 168 Neighborhood Market stores in the U.S., with plans to double the store- count over the next couple years. As we've said a number of times in Fresh & Easy Buzz, California will play a major role at Walmart in the growing of that store-count. Stay tuned.

[Read our extensive four-plus years of reporting, analysis and commentary about Walmart Stores, Inc., including its Walmart Neighborhood Market and other smaller format grocery stores at the following links: , , , .]

The Walmart Neighborhood Market supermarket (an urban version) in Chicago's West Loop Neighborhood, which opened earlier this year. The store is about 31,000 square feet. Photo courtesy blog.chicagoarchitecture.info.

Walmart Neighborhood Market in California
Walmart Neighborhood Market - 13 Confirmed California Store Locations
Confirmation sources: Delia Garcia, Walmart West. Steven Ristivo, Walmart Stores, Inc., senior director of community affairs.


1. City: Los Angeles
County: Los Angeles
Address: Corner Grand Avenue and Ceasar Chavez Avenue. Downtown, on outskirts of Chinatown.
Square-footage: 33K. Ground floor of senior citizens' residential complex.
Current target opening: Early-to-mid-2013. Construction to begin summer 2012

2. City: Huntington Beach
County: Orange
Address: Corner Beach Boulevard and Atlantic Avenue. Former Rite-Aid drug store building
Square-footage: 31K
Current target opening: August 2012

3. City: Rancho Santa Margarita
County: Orange
Address: 30491 Avenida de Las Flores. Avenida de los Flores and Antonio Parkway
Square-footage: 33K
Current target opening: August 2012

4. City: Camarillo
County: Ventura
Address: Camarillo Town Shopping Center. 275 West Ventura Boulevard. Vacant Linens and Things building
Square-footage: 34-36K
Current target opening: Late 2012

5. City: San Diego
County: San Diego
Address: Logan Heights. Imperial Avenue between 21rst and 22nd Streets, near downtown. In historic former Farmers Market building. Neighborhood is underserved by grocery stores offering fresh food and groceries at affordable prices.
Square-footage: 48,800K
Current target opening: Late 2012/Early 2013


San Francisco Bay Area

6. City: Pleasanton/East Bay
County: Alameda
Address: Meadow Plaza shopping center. 3112 Santa Rita Road. Santa Rita Road and Stoneridge Drive
Former Nob Hill Foods' (Raley's owned) supermarket building. Near Safeway Stores, Inc.'s corporate headquarters. Less than a mile from a Safeway store and a Fresh & Easy market.
Square-footage: 31K
Current targeted opening: Late 2012/Early 2013

7. City: San Ramon/East Bay
County: Contra Costa
Address: Country Club Village Shopping Center. 9100 Alcosta Boulevard. Former Ralphs' supermarket and La Asia supermarket building. Closest competitor: Save Mart-owned Lucky supermarket, less than one mile away.
Square-footage: 33-36K
Current target opening: Fall 2012

8. City: Hayward/East Bay
County: Alameda
Address: 2480 Whipple Road. Former Circuit City building
Square-footage: 33-35K
Current target opening: Late 2012/Early 2013

9. City: San Jose
County: Santa Clara
Address: Westgate Mall. 1600 Saratoga Avenue
Square-footage: 38K. Recently closed Safeway store
Current target opening: Fall 2012

Sacramento Region

10. City: Sacramento
County: Sacramento
Address: Taylor Center. 2700 Marconi Avenue. Marconi Avenue and Fulton Avenue. Former Goore's children's store building. Prior to 1999, when Goore's moved in, was a the American Stores' Inc. Lucky supermarket. Goore's closed in fall 2011.
Square-footage: 32-36K*
Current target opening: Late 2012/Early 2013

11. City: Granite Bay (Roseville border)
County: Placer
Address: Sierra Oaks shopping center. Douglas and Sierra College boulevards. Former Grocery Outlet store, plus additional square-footage attached to the building but previously not used by Grocery Outlet.
Square-footage: 43K
Current target opening: Late 2012-to-early-2013

12. City: Lincoln
County: Placer
Address: Highway 65 and Second Street. Former Rainbow Market building
Square-footage: 31-32K
Current target opening: Fall 2012

13. City: Modesto
County: Stanislaus
Address: Coffee and Orangeburg shopping center. Corner Coffee Road and Orangeburg Avenue. Former Dollar Superstore building (26K sq. ft.. Plus, former Leslie Pool Supply building next door (10K sq. ft.)
Square-footage: 36K.
Current target opening: Late 2012-to-early 2013