Dollar General is luring more shoppers with its cheap groceries — but it might be backfiring

Dollar General has been expanding its grocery assortment.

While more people are shopping for groceries at Dollar General, other categories are suffering.
Sales of home products and seasonal items were more muted during the most recent quarter. 
Analysts say adding more grocery items to stores can risk cannibalizing sales in other departments. 

More people are shopping for cheap groceries at Dollar General, but it’s not necessarily a good thing.

The discount chain reported its fourth-quarter earnings early Thursday. Same-store sales were up 5.7% during the quarter, largely thanks to growth in its consumables category, the company said.

Revenue for consumables – which includes food items, health and beauty products, and snacks, among other things –increased by 22.7% during Q4, while sales of non-consumable products such as homeware and seasonable items were up by a more muted 3.1% and 5.7%. Apparel sales declined by 7.3%. 

While more consumers are focused on essentials like food as inflation pressures budgets, experts say that Dollar General may also be struggling to persuade shoppers who come in for food to buy other things.

Food inflation has reached historic highs over the last year, with prices for certain grocery basics, such as eggs, creating challenges for discount-focused retailers. Earlier this week, fellow dollar store chain Dollar Tree announced it was pausing stocking eggs due to high prices.

Dollar General has been gradually ramping up its grocery business, bringing fresh and frozen food to more stores and building out a self-distribution model for these products as part of its DG Fresh initiative. The company said it would have fresh produce in 5,000 of its stores by the end of 2023 and plans to bring these items to 10,000 of its more than 19,000 locations over the next few years. 

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Source:: Businessinsider

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