Dollar General has gotten hit by steep fines for safety violations, slammed on late-night TV and even overruled by its own shareholders.
On Thursday, CEO Todd Vasos laid out on an earnings call with investors the discounter’s plans to try to turn around each the corporate’s performance and its public relations problems. He said the retailer will put more staff within the front of its stores, decelerate recent store openings, take underperforming items off shelves and step up efforts to keep merchandise in stock.
It marked the primary earnings call since Vasos took the helm again. He was brought out of retirement in October, after his successor Jeff Owen got ousted lower than a yr into the job.
On the time, the board’s chairman, Michael Calbert, said in a news release that the corporate needed the leadership change “to restore stability and confidence.”
On the decision Thursday, Vasos said, “We’ve got some exertions yet ahead of us, but we all know what to do. We have done it before and we’re absolutely set on doing it again, as quickly as possible.”
Here’s what the retailer reported for the three-month period that ended Nov. 3 compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly referred to as Refinitiv:
- Earnings per share: $1.26 vs. $1.19 expected
- Revenue: $9.69 billion vs $9.64 billion expected
Within the fiscal third quarter, Dollar General’s net income fell to $276.2 million, or $1.26 per share, from $526.2 million, or $2.33 per share, within the year-ago period. Net sales rose from $9.46 billion a yr ago.
Dollar General could have topped Wall Street’s fiscal third-quarter expectations, nevertheless it has had a tough yr. The corporate is the fastest-growing retailer by store count, but its sales have slowed, its stock price has slumped and its repute has gotten hurt by federal scrutiny over work conditions.
Shares of Dollar General closed Wednesday at $133.92, down by about 46% up to now this yr. The corporate has far underperformed the 18% gains of the S&P 500.
Dollar General has racked up greater than $21 million in fines from the federal Occupational Safety and Health Administration for having blocked fire exits, dangerous levels of clutter and more. This spring, shareholders voted for a resolution that called for an independent, third-party audit into employee safety, a move that the corporate opposed.
Its labor issues have garnered broader attention. On a recent episode of HBO’s “Last Week Tonight with John Oliver,” the comedian ridiculed Dollar General and its rival, Dollar Tree. He called out the businesses for violations cited by OSHA, including rat infestations in warehouses and dangerously messy store aisles, and for complaints by staff on social media, similar to staffing a store with a single employee.
Dollar General’s company-specific challenges have been exacerbated by inflation, since shoppers have been buying fewer discretionary items and even on the lookout for ways to save on necessities.
For the complete yr, the corporate anticipates same-store sales, a metric used to take out the impact of recent stores or stores under renovation, will range from a decline of about 1% to flat.
Vasos on Thursday said the corporate “checked out every element of our business that touches our consumer” before coming up with plans to straighten up its stores and switch around its business. He stressed retail fundamentals and used the phrase “back to the fundamentals” 10 times on an hourlong earnings call.
One change that shoppers may notice, Vasos said, is more employees within the front of its stores. The corporate previously announced $150 million in additional investment in store labor hours this yr.
He said the corporate has relied an excessive amount of on self-checkout, which ought to be “a secondary checkout vehicle, not a primary.”
Bringing down high turnover of store managers and keeping items in stock are priorities, too, Vasos said. “The quantity of out-of-stocks we now have in our store are probably among the largest that I’ve seen within the 15-plus years I have been here,” he said.
Over the past two weeks, he said the corporate has already seen some improvements because it devotes more time to inventory management at the shop level.
Vasos said Dollar General will whittle down the items it sells. It currently has between 11,000 and 12,000 different items at each store, he said, nevertheless it plans to take out “a meaningful number” to help with managing inventory and reduce levels of shrink, a term used to describe inventory losses from theft or damage to items.
For instance, he said, it might drop one or two of the variants of mayonnaise that it has on the shelf today.
In the following fiscal yr, Vasos said Dollar General plans to open 800 stores, remodel 1,500 stores and relocate 85 stores, which is a smaller number than in recent times. Vasos said the corporate reduced its real estate plans to deal with its current stores and to reduce costs, since construction projects have turn into pricier.
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