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Dollar General reported strong sales and earnings in 2012, including growing private label penetration that could lead the company higher on the PLB Top 35 list in October.
Dollar General ranked 20thon the list released in October 2012, based on 2011 sales. It reported 2012 sales rising 8.2 percent from a year ago to a record $16 billion. In addition, the retailer said its private label penetration grew from an estimated 22 percent in 2011 to 23.6 percent in 2012.
That would leave Dollar General with about $3.776 billion in private label sales in 2012, which would put it past CVS for 16thon the PLB Top 35 list, just behind Ahold USA and Sobey’s.
“As part of our ongoing efforts to increase our gross margin rate, we added more than 200 private brand items in 2012 and continue to expand other private and proprietary brands in consumables,” CEO Rick Dreiling told analysts on a conference call, according to transcripts from Seeking Alpha. “We now carry nearly 2,100 private brand SKUs in consumables with strong sales growth in food, perishables, candy and snacks, home cleaning and health and beauty. We exited 2012 with a private brand penetration of 23.6 percent, and private brands grew faster than overall sales.”
Same-store sales grew for the 23rdconsecutive year, the retailer reported, up 4.7 percent from 2011.
Dreiling said that improved quality, branding, packaging and presentation helped grow seasonal and home categories in 2012, while better quality helped pick up non-consumable sales.
As Dollar General rolls out a new phase of merchandising in 2013, Dreiling said the mix of sales will be weighted toward consumables.
“It's more on the consumables side, particularly focused on HBA,” he said, according to the Seeking Alpha transcripts. “We had several categories that we continue to be under-penetrated on the HBA, and we believe that's where we have the greatest opportunity for sales growth, and ultimately, margin enhancement down the road.”
In response to a question from analysts, Dollar General CFO David Tehle said the retailer expected its private labels to lead gains in margin in 2013.
“Probably in order of importance, the private brand, No. 1; foreign sourcing, a very close No. 2; shrink; and then transportation,” he said of margin growers. “So as we look at it, those are all multiyear initiatives that we have. And again, there's still plenty of room in all of those in terms of adding to our long-term growth in our margin.”