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Analyzing Dollar General’s Same-Store Sales Trends

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Sales comps have increased for 27 consecutive years

Dollar General’s (DG) same-store sales have grown for 27 consecutive years. What’s more interesting is that comps rather improved during the recession period. As you can see from the chart below, sales comps rose from 2.1% in fiscal 2007 to 9% in fiscal 2008 and 9.5% in fiscal 2009. Affordable prices increased demand for products at dollar stores during the recession.

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A look at Dollar General’s recent comps

The company has stood firm and maintained steady comps throughout. However, with the beginning of 2016, Dollar General, like other grocers and retailers (XRT), started facing deflationary headwinds. A persistent decline in food prices along with reduced food stamp benefits took a toll on its sale comps, which fell 0.1% in 3Q16. This was the first time in the last 36 quarters that comps turned negative.

However, comps moved back to positive territory and rose 1% during the fourth quarter (the last reported quarter). While the company witnessed an increase in average transaction size, traffic continued to fall during the quarter. For full fiscal 2016, comps rose 0.9%.

How have competitors fared?

Dollar General’s close competitor Dollar Tree (DLTR) has remained stronger despite ongoing deflationary headwinds. Its sales comps edged up 1.3% in the last reported quarter, maintaining its 36-quarter-long positive sales comps spree.

The reason behind the better performance is mainly its product mix, which is tilted toward discretionary items, compared to Dollar General. It has therefore not been as badly hit by rising food deflation.

However, grocers like Kroger (KR) and Whole Foods Market (WFM) have been under water because of persistent deflation. Whole Foods has seen negative same-store sales for the last six consecutive quarters. Kroger reported negative comps for the first time in the last 52 quarters when it reported quarterly results recently.

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