Dollar General to eliminate ‘vast majority’ of self-checkout

Dive Brief:

Dollar General CEO Todd Vasos said Thursday that the company plans to remove self-checkout from “the vast majority of stores” as part of larger overall shrink reduction efforts that include changes in supply chain and merchandising. Dollar General has already removed self-checkouts from 12,000 of its more than 20,000 stores, Vasos said.
The discount retailer also said it plans to increase the number of store remodels but reduce planned store openings for fiscal year 2024. Dollar General said it now expects to open 730 new stores — down from 800 previously planned. It also plans 1,620 remodels, up from 1,500. It’s maintaining plans to relocate 85 stores.
Dollar General’s first quarter net sales rose 6.1% year over year to $9.9 billion, driven by sales contributions from new stores and growth in same-store sales, the company said in a Thursday earnings announcement. Net income fell 29.4% to $363.3 million from $514.4 million a year ago, while same-store sales rose 2.4% for Q1 year over year.

Dive Insight:

Vasos said self checkout will remain in a limited number of higher volume stores. He added that the shift away from self checkout will drive increased customer engagement and should position the company to begin reducing shrink in the second half of 2024 with a material impact expected in 2025.

“Shrink continues to be the most significant headwind in our business,” Vasos said.

In addition to cutting self-checkouts, Vasos said the company’s supply chain teams are also addressing shrink on other fronts that include ensuring deliveries are on time and made in full. He said Dollar General is also focusing on delivering a more consistent front-end staffing presence and removing high-shrink SKUs.

Vasos also said during an earnings call that softness in discretionary categories reflects the continued spending pressure consumers are currently experiencing. Consumers “continue to be very value oriented in their shopping behavior, which we see manifested in accelerated share growth in private brands sales as well as increased engagement with items at or below the $1 price point,” Vasos said. “Importantly, we continue to do well with our core customers while growing with middle and higher income trading customers from adjacent cohorts.”

Dollar General’s first-quarter beat is “evidence that more defensively positioned consumable heavy models are positioned to navigate a softer, low-income backdrop,” Wells Fargo analysts led by Edward Kelly said in a note. Wells Fargo’s analysts said Dollar General’s “challenged performance” last year offers room for improvement. The retailer’s Q1 performance “suggests the company is on track for some improvement.”

However, “while we are disappointed to hear management admit in the release to experiencing shrink and mix headwinds greater than initially expected coming into the year, the margin didn't miss,” Wells Fargo said.