October 17, 2023
Photo: iStock
Can an Ex-CEO Get Dollar General Back on Track?
Dollar General reappointed Todd Vasos as CEO following four straight quarters of earnings shortfalls.
Gone is Jeff Owen, who replaced Vasos as CEO in November 2022. At Dollar General for nearly 30 years, Owen was formerly COO before taking the top post.
“The Board has tremendous respect for Jeff and greatly appreciates his many contributions to the company, especially during his long tenure leading our retail operations,” said Michael Calbert, chairman of Dollar General’s board. “However, at this time the board has determined that a change in leadership is necessary to restore stability and confidence in the company moving forward.”
Vasos, who served as Dollar General’s CEO from June 2015 to November 2022, continued as senior advisor until his retirement in April and remained on the board. Over his seven-year tenure, Vasos added 7,000 stores, expanded annual revenue by more than 80%, and more than doubled its market capitalization.
Vasos is “acutely aware of the challenges facing our business and the industry more broadly,” said Calbert.
Dollar General also slightly lowered its annual guidance again after reducing it while reporting second-quarter and first-quarter results.
The U.S.’s largest dollar store operator was expected to benefit as consumers trade down to dollar stores to save money amid an inflationary climate, but any gains have been offset by a sharp pullback in spending by its core lower-income consumers.
Owen said on Dollar General’s second-quarter call, “Our customer, what she’s telling us is that certainly as gas prices are less than last year, but they’re accelerating throughout 2023, and she’s still feeling the headwinds of the SNAP reduction and also the lack of tax refunds. And her savings are gone. And so, certainly, she is still living with the inflationary pressure.”
Dollar General has also been impacted by capacity issues last year that led to elevated inventory levels as well as higher shrink. The company is implementing targeted price reductions to reinforce its value positioning and making investments in labor to improve in-store service levels and in demand forecasting tools to improve inventory flow.
Shares of Dollar General jumped nearly 8% on Friday after the news of the hiring, although several analysts reduced their price targets on the stock.
Telsey Advisory Group analyst Joe Feldman said in a note, according to Reuters, “The move is a clear acknowledgment of rising investor concerns about the company’s future related to a clouded business strategy, choppy execution, consistent earnings misses, and a decline in the share price of (about) 60% since Owen took over.”
BrainTrust
Lucille DeHart
Principal, MKT Marketing Services/Columbus Consulting
DeAnn Campbell
Head of Retail Insights, AAG Consulting Group
Brandon Rael
Strategy & Operations Transformation Leader
Recent Discussions
Discussion Questions
Can bringing back Todd Vasos as CEO help Dollar General stabilize the business? What obvious and less obvious challenges does Dollar General face?
Poll
Loading …
Former CEO Todd Vasos has seen it all, and he has an impressive track record of delivering strong results, so bringing him back will be well received. However, bringing back an experienced leader may indeed help Dollar General re-set priorities, improve execution, and restore confidence in the team, but it won’t change the economic headwinds Dollar General customers are facing. Dollar General has been working on expanding their store offerings, but now it needs to attract more and different shoppers to their stores. With a store footprint of almost 20,000 stores, they have plenty of opportunities to experiment with new store layouts, concepts and product mixes. Many retailers would love to have the challenges Dollar General has.
The question to ask is: why has Dollar General come off the tracks? There are two main reasons.
One is the cost-of-living-crisis which has hit core Dollar General shoppers hard, resulting in them cutting back on non-consumable purchases from the chain. During times of economic difficulty, Dollar General traditionally makes gains from more people in middle and even higher income groups trading down. This trend is still in play, but it is nowhere near as powerful as in previous downturns. So, all in all, this is a challenging trading period.
The second is some operational sloppiness. The business has faced supply chain issues, has failed to get to grips with staffing problems, and is suffering from poor standards across too many stores.
Todd Vasos will swiftly get to grips with the second set of issues. Resolving the first set of problems will be more challenging.
Sometimes you can go home again, but you have to redecorate. Things have changed the last year or so and even the discounters have to respond differently. The Dollar General customers are in the direct line of inflation fire and with consumer debt so high the focus has to be on assortments and need-driven products. Make every dollar count–yes, you can use that as your tagline.
Prior to the recent impacts of the relentless rate of inflation and the cost of living crisis, Dollar General and the Dollar Store retail segment has been a recession-proof business model. However, as we have seen with the aspirational retail luxury market, the opposite end of the spectrum, Dollar Stores are being impacted by consumers cutting back on non-essential items.
Dollar General has experienced a record growth rate, and their store expansion strategies have reaped rewards over the years. However, the rising costs to serve and operating costs have led to an erosion of their margins and overall profitability.
It will be interesting to see the strategies that Todd Vaso will leverage to turn the business around. Dollar General will go a long way to turn things in the right direction by prioritizing their operations and driving a more efficient operating model. However, Dollar General’s challenges have proven that no industry or business is immune to the geopolitical and macroeconomic headwinds.
Dollar General has enjoyed eight decades with almost no real competition, thus they haven’t built the muscles needed to differentiate in a highly competitive landscape. With discounts becoming a default for most grocers, the rise of big box wholesalers and delivery on demand from almost any grocery store, Dollar General’s “build it and they will come” strategy isn’t working as well as it used to. They have been smart to create the PopShelf and DGX brands to try to spread their wings into new consumer groups. Their health van idea has merit but doesn’t do enough to make wellness produces and services available in enough stores. In truth they need a major overhaul to their fundamental business model to bring more services and lifestyle products to the communities they serve. I don’t think going backward to previous leadership, solid as it was, can trigger the forward momentum that Dollar General really needs.
More Discussions
Should US Consumers Be as Upbeat Over Their Finances as Data Suggests?
A new study suggests U.S. consumers are rosy over their finances, but should they be?Has Storytelling Become a Rediscovered Retail Art?
Are retailers finally leaning (again) into narrative to excite?Will the Gulf Between Walmart and Target Deepen in 2026?
Will Walmart widen its lead over Target in 2026?
Former CEO Todd Vasos has seen it all, and he has an impressive track record of delivering strong results, so bringing him back will be well received. However, bringing back an experienced leader may indeed help Dollar General re-set priorities, improve execution, and restore confidence in the team, but it won’t change the economic headwinds Dollar General customers are facing. Dollar General has been working on expanding their store offerings, but now it needs to attract more and different shoppers to their stores. With a store footprint of almost 20,000 stores, they have plenty of opportunities to experiment with new store layouts, concepts and product mixes. Many retailers would love to have the challenges Dollar General has.
The question to ask is: why has Dollar General come off the tracks? There are two main reasons.
One is the cost-of-living-crisis which has hit core Dollar General shoppers hard, resulting in them cutting back on non-consumable purchases from the chain. During times of economic difficulty, Dollar General traditionally makes gains from more people in middle and even higher income groups trading down. This trend is still in play, but it is nowhere near as powerful as in previous downturns. So, all in all, this is a challenging trading period.
The second is some operational sloppiness. The business has faced supply chain issues, has failed to get to grips with staffing problems, and is suffering from poor standards across too many stores.
Todd Vasos will swiftly get to grips with the second set of issues. Resolving the first set of problems will be more challenging.
Sometimes you can go home again, but you have to redecorate. Things have changed the last year or so and even the discounters have to respond differently. The Dollar General customers are in the direct line of inflation fire and with consumer debt so high the focus has to be on assortments and need-driven products. Make every dollar count–yes, you can use that as your tagline.
Prior to the recent impacts of the relentless rate of inflation and the cost of living crisis, Dollar General and the Dollar Store retail segment has been a recession-proof business model. However, as we have seen with the aspirational retail luxury market, the opposite end of the spectrum, Dollar Stores are being impacted by consumers cutting back on non-essential items.
Dollar General has experienced a record growth rate, and their store expansion strategies have reaped rewards over the years. However, the rising costs to serve and operating costs have led to an erosion of their margins and overall profitability.
It will be interesting to see the strategies that Todd Vaso will leverage to turn the business around. Dollar General will go a long way to turn things in the right direction by prioritizing their operations and driving a more efficient operating model. However, Dollar General’s challenges have proven that no industry or business is immune to the geopolitical and macroeconomic headwinds.
Dollar General has enjoyed eight decades with almost no real competition, thus they haven’t built the muscles needed to differentiate in a highly competitive landscape. With discounts becoming a default for most grocers, the rise of big box wholesalers and delivery on demand from almost any grocery store, Dollar General’s “build it and they will come” strategy isn’t working as well as it used to. They have been smart to create the PopShelf and DGX brands to try to spread their wings into new consumer groups. Their health van idea has merit but doesn’t do enough to make wellness produces and services available in enough stores. In truth they need a major overhaul to their fundamental business model to bring more services and lifestyle products to the communities they serve. I don’t think going backward to previous leadership, solid as it was, can trigger the forward momentum that Dollar General really needs.