“We went where they ain’t”

Sarah Nassauer reports in The Wall Street Journal,

Dollar General Corp.’s 14,000 stores yielded more than double the profit of Macy’s Inc. on less revenue during its most recent fiscal year. And its $22 billion market value eclipses the largest U.S. grocery chain, Kroger Co., which has five times the revenue.

The retailer relies on rapid store openings to keep revenue climbing and investors happy; 2016 marked its 27th consecutive year of sales growth in stores open at least a year.

While many large retailers are closing locations, Dollar General executives said they planned to build thousands more stores, mostly in small communities that have otherwise shown few signs of the U.S. economic recovery.

The more the rural U.S. struggles, company officials said, the more places Dollar General has found to prosper. “The economy is continuing to create more of our core customer,” Chief Executive Todd Vasos said in an interview at the company’s Goodlettsville, Tenn., headquarters.

...Dollar General’s target shoppers come from households earning $40,000 or less. Its primary competitor, Dollar Tree Inc., has more suburban locations and sells all items for $1, including unbranded knickknacks that attract shoppers browsing for fun. In 2015, Dollar Tree bought another competing low-price chain, Family Dollar Stores Inc. which has more urban locations.

...The founders of Dollar General lived in small-town Kentucky and started the company there in 1955, making the store’s rural locations a natural fit. When Wal-Mart Stores Inc. grew past 3,000 stores in the early 2000s, a strategy surfaced: “We went where they ain’t,” said David Perdue, Dollar General’s chief executive from 2003 to 2007.

That meant opening stores “where Wal-Mart’s 40 miles away and we can meet those people’s needs,” said Mr. Perdue, now Georgia’s junior U.S. senator.