Dollar General CEO Discusses Future Direction
Richard Dreiling, the new chief executive officer at Dollar General, recently spoke with The Tennessean about the company he joined two months ago and what it will take to drive growth during trying economic times.
On joining Dollar General after two years running the Duane Reade drugstore chain in New York, Mr. Dreiling talked about those things that attracted him to the company.
“The business model to me is fascinating,” he said. “It serves smaller communities, a different demographic and it gives me the opportunity to come in and apply some of the retail disciplines, some of the principles, executed across other retailing segments.”
Mr. Dreiling sees higher prices and economic uncertainty as an opportunity for Dollar General to strengthen its business.
“The fact that there’s pressure on food, which is facing inflation right now, and on gasoline, bodes well for [Dollar General]. I think people are going to be looking for an inexpensive alternative to the channels that they’ve historically [shopped] in,” he said.
“Also, when you think about the economy and think about the big-box operators, they’re all talking about a smaller-box (store) format now. And that smaller format is where we’re keenly positioned already, and a format that we understand greatly as an organization,” he added.
As to future plans for store closings and openings, Dollar General’s CEO told The Tennessean, “We’re going to build approximately 200 new stores next year. We are going to remodel approximately 250 stores next year. I haven’t had enough time on the job yet to say how many more stores we might close.”
Operating in a price/value format makes cost control a high priority at Dollar General.
“We’re going to focus on taking out costs that are redundant … and we’re also going to look at what I call unproductive inventory. You don’t want to reduce inventory that the customer expects to see on the shelf. But other products go through a cycle where they are very hot and generate a lot of gross profit … and then where they fall out of favor and get discontinued,” he said. “What we want to do is manage the inventory on the back end of the product cycle… If anything as we take out some unproductive [product lines] we’re actually finding items that we can add back into our mix. As we gain legs on this, we’ll reduce some inventory but replace it probably with more productive items that the consumer is looking for.”
Discussion Questions: Do you think that Dollar General and other dollar stores are in a unique position to pick up market share during uncertain economic times such as those being experienced at present? Do the dollar stores have a real opportunity to expand their reach into the middle class or is this mostly wishful thinking?