dollar general
... around 6,192 stores in 27 states and generated in net sales $6.1 millions. 2. Dollar General diagnosis a. Financial analysis Net Sales Increases in net sales resulted primarily from 587 net new stores and a same-store sales increase of 4.0% in 2003 compared to 2002, and 573 net new stores and a same-store sales increase of 5.7% in 2002 compared to 2001. The Company’s merchandising strategy in recent years has been to place a greater emphasis on faster-turning consumable products and to give less prominence to slower-turning home products and clothing. The Company believes that this strategy has enabled it to better serve its customers while improving its inventory turns. As a result of this strategy, over the past three years the highly consumable category has become a greater percentage of the Company’s overall sales mix while the percentages of the home products, seasonal product and basic clothing categories have declined. In 2002 and 2003, the mix was as follows (in percent of sales): 2003 2002 • Highly Consumable 63% 60.2% • Seasonal Products 15% 16.3% • Home Products 12% 13.3% • Basic Clothing 10% 10.2% The Company’s same-store sales increase in 2003 over 2002 of 4.0%, or $228.3 million, was due to a number of factors, including but not limited to: increased sales of candy and snacks, health and beauty aids items, pet supplies and perishable products primarily due to the increase in the number of stores with coolers (in 2002, 1,400 stores had coolers). Gross Profit The gross profit increased by more than 200 millions dollar in 2003 as compared with 2002 primarily due to the following: The Company made progress in reducing the shrink at problem stores during 2003. Some of the actions taken by the Company to combat shrink beginning in 2002 included the installation and the implementation of software that improve the inventory management. They also invest in others technologies which help purchasing and store allocation decisions. Current Financial Condition The Company has also to deal with its accounting issues due to the uncertainty about their past financial reports. The Company is still under the investigation of the US Securities and Exchange Commission and has to provide solid proof for every financial figures published and for every transactions done. b. Strengths and weaknesses analysis STRENGTHS WEAKNESSES • One of the leading dollar store retailers in the US • Improved financial performance • Stores located in small communities • Invested in better distribution facilities • Space issues • Merchandise mix problems • Lost of competitive advantage Strengths • Dollar General is one of the leading dollar store retailers in the US. The Company enjoys a strong market position within this particular segment of the retail market. It has a low cost operating structure and a relatively limited assortment of products offered. The Company’s strong market position will help to enhance Dollar General’s brand awareness. Dollar General is well known Company which does not need to communicate on their strategy because of their strong identity, they have low communication cost. This will in turn make it easier for the Company to attract new custom. Their strong store experience allows the ability to develop their strategy with a high knowledge experience. It facilitates their expansion strategy. • The Company improved its financial performance and increased in revenue in 2003 up to $6.1 billion after a 15% increase in 2002. Net income also grew by 27,7% in 2003 reaching $264,946. • Stores are located in small communities, meaning it does not have to compete with the larger retail outlets for custom. • Moreover they have made better distribution investments which allow them to have better facilities in their distribution and lower costs. Weaknesses • Growing fast, involved learning experiences, duplicating models, and creating format. It has been a force during a few years. Nowadays, Dollar General has to adapt its stores to the demand, and follow the market growth. • Merchandise mix problems Dollar General has also experienced merchandise mix problems in recent years. These merchandise mix problems have led to the Company’s inventories becoming obsolete. This has forced Dollar General to write down some of the value of its inventories. • The concept of dollar store has been a success, and many competitors are on the general store traces. Their concept has been copied, so their competitive advantage and their strategy are no more as efficient as in the beginning. Competitors have also learnt form the Company’s experience. 3. External Analysis a. Competitors According to the case the two major competitors of Dollar General Corporation are: • Family dollar • Dollar tree These two companies have adopted the same strategy than Dollar General. Their expansion has been fast, they have the same customers, and the same core business. Although they have many customers such as The Talbots, Inc.Fred's, 7-Eleven, Sears Roebuck, Wal Mart, 99 Cents Only Stores, Kmart or Target. COMPETITOR COMPARISON (2002) The following chart shows the differences between those three companies. Comparison criteria - 2 - 1 0 1 2 Industrial Equipment (number of stores, distribution center...) Wide of product range Productivity Profitability Pricing Image Penetration rate Revenue Growth over the past year Dollar Tree Family Dollar Dollar General Following this graph study it seems Dollar General generally remains the most impressive competitors of the sector. DG remains the best in term of image, penetration rate (even if it is only present in 27 states whereas the others are present in about 40 states), financial position (they have the best Net Income 265 millions dollars, Dollar Tree: 155 millions and Family Dollar: 217 millions) and in term of selling force thanks to its still greater number of stores (6,113 stores for 54,000 employees, Dollar Tree: 2,263 stores for less than 9,600 employees and Family Dollar: 4,616 stores for less than 22,000 employees). [ in 2004, Dollar Tree has got 9,600 employees and Family Dollar 22,000 employees according to Yahoo.com so we can guess that it was inferior in 2002] Nevertheless DG has to take care not to lose its leadership concerning the wide of product range proposed. And even if the target household income is not exactly the same than Dollar Tree, DG has also to pay attention to the politic pricing implemented by Dollar Tree, which is in fact the best of the sector thanks to products price at $1 or less than $1. But generally, DG remains really well positioned among its competitors. b. Opportunities and threats analysis OPPORTUNITIES THREATS • New distribution centers • Business less susceptible to slowdown in consumer spending • Stores expansion in new states • Size of the stores • New competition • People qualification • Dependency to suppliers Opportunities • The Company is dependent upon the smooth functioning of its distribution network and upon the capacity of its distribution centers. The Company relies on the ability to replenish depleted inventory through deliveries to its distribution centers from suppliers. New distribution centers are expected in the end 2004 or in 2005 in order to support continued growth. • The dollar business ...