Dollar stores picked up traffic and sales in the first quarter due to COVID-19

Dollar stores, deemed essential businesses during COVID-19 lockdowns, have drawn new customers stocking up on paper, food and cleaning products.

Dollar General same-store sales jumped 21.7 percent year over year during the first quarter, propelled by higher average transaction amounts and customer traffic. The number of first-time customers increased, as more shoppers sought value and convenience amid the pandemic. Same-store year-over-year sales growth peaked in March, at 34.5 percent, and moderated a bit in April, according to CEO Todd Vasos.

Same-store sales at Dollar Tree Inc. — parent of the Dollar Tree and Family Dollar brands, which total 15,370 stores — grew 7.1 percent year in the first quarter, thanks to shoppers stocking up on essential goods. The number of first-time customers at each brand has increased every week since the pandemic began, says CEO Gary Philbin. “The current environment with families staying close to home has provided us an opportunity to showcase improvements we have been working very hard on in recent years,” he said. “Our investment in the Family Dollar store base has been a key sales driver since we accelerated our renovations a year ago. Now, with customers and communities needing us more than ever, they are being introduced into a format that has a better shopping experience when they need it most.”

The increased expense of maintaining safe shopping environments is well worth the extra sales, executives agreed. In the first quarter, Dollar Tree Inc. spent $73.2 million related to COVID-19, including hourly wage premiums for store and distribution center employees, as well as safety and sanitization supplies.

Dollar General has enhanced cleaning protocols, implemented social distancing measures, provided personal protective equipment for employees, checked distribution employees’ temperatures and installed Plexiglass barriers at registers. It also set aside $60 million in the first quarter for employee appreciation bonuses. Sales growth more than offset those costs, Vasos says.

Expansion plans

Dollar Tree Inc. expects to complete 750 Family Dollar renovations in fiscal year 2020, down 500 from its pre-pandemic plans. It now plans to open 325 Dollar Trees and 175 Family Dollars in fiscal year 2020, trimming 25 from each brand’s pre-pandemic plans.

Dollar General’s Vasos said, “Through the end of the first quarter, the COVID-19 pandemic has not resulted in a delay in our real estate plans, and we do not currently expect any significant delays based on what is currently known to management.” During the first quarter, Dollar General opened 250 new stores, remodeled 481 stores and relocated 17. For the full year 2020, the retailer continues to plan to open 1,000 stores, remodel 1,500 stores and relocate 80. Dollar General’s buy-online-pickup-in-store program is prepped for a rapid expansion, as well, and the retailer has added mobile checkout technology to 750 stores.

Both retail companies know, however, that the sales surge might not last forever, especially if the government fails to provide more stimulus to consumers, Vasos says. “The vast shutdown of many businesses in the United States has resulted in high levels of unemployment, which could have a significant adverse impact on our core customers for an unknown length of time.” According to Philbin, the size of customers’ baskets at Dollar Tree and Family Dollar stores increased after the federal government released stimulus checks. “We’re seeing enhanced purchasing power and increased EBT sales,” he said, referring to food stamp purchases. “We’ll see how it plays out in terms of the duration of the legislation.”