- Dollar General said Thursday it plans to have 1,000 Popshelf stores by 2025. It currently has 30.
- These stores, which sell pricier products, are aimed at wealthy, suburban millennials.
- This could give Dollar General the opportunity to boost profit margins and drive growth, expert says.
Dollar General has grand plans for its pricier store concept, Popshelf, aimed at high-earning suburban millennials.
On Thursday, reporting its third-quarter earnings, the discount chain said it plans to grow Popshelf to 1,000 US locations by 2025. It currently has just 30 of these stores.
Popshelf stocks a mix of non-consumable products such as homeware, arts and crafts, and toys that mostly cost $5 or less. Unlike its sister chain, Dollar General, Popshelf is targeted at a wealthier audience – specifically, millennial women that have an annual household income that ranges between $50,000 to $125,000. The typical Dollar General customer has an income of $40,000 or less.
News of the expansion plans come as Dollar General saw sales decline in recent quarters after more than a decade of blockbuster growth following the 2008 recession.
In a note to clients on Thursday, GlobalData Retail analyst Neil Saunders said that while the company remains highly profitable, an erosion in profitability over the last year is a concern. Net income as a proportion of sales plunged from 7.0% last year to a much weaker 5.7% this year, he said.
Though dollar stores typically benefit during economic downturns, or in inflationary environments when customers are penny-pinching, they are also at a major disadvantage in that they are limited in how much they can raise prices. This has been especially evident at present as the US experiences the highest levels of inflation in more than 30 years.
Dollar Tree, a fellow major dollar store chain, that had committed to the $1-and-under price point since its launch, recently said it would raise its prices to $1.25 because of rising transportation and labor costs.
The Popshelf concept could play a key role in enabling Dollar General to boost its profit margins by offering products at higher prices as inflation cuts into its bottom line, Saunders said. Plus, it could give the company room to grow its business by targeting a new and wealthier customer base.