Dollar General to close 400 stores

This Dollar General on Sparta Street is one of three stores in McMinnville and one of four in Warren County. The company has not revealed which stores will close.

The plan, which also includes changing its inventory management model, will cost about $138 million, with $74 million related to store closings and $64 million for higher markdowns to aid the move away from its “packaway” inventory management model, as well as other expenses.

Dollar General, based in Goodlettsville, had 8,276 neighborhood stores in 34 states as of Nov. 24. There are three Dollar General stores in McMinnville and one in Morrison.

About $80 million of the costs will be booked in the fiscal 2006 third quarter ended Nov. 3.

In the most recent quarter, Dollar General reported a 40 percent decline in profit on increased costs, despite slightly higher sales.

“These strategic changes are designed to enhance the shopping experience for our customers and put the company on a solid foundation for profitable and sustainable growth in the future,” said David A. Perdue, chairman and CEO. “Fiscal 2007 will be a year of transition for us as our team will be highly focused on executing this plan.”

The company announced plans as well to repurchase up to $500 million of the company’s outstanding common stock over the next two years in a buyback that expires Dec. 31, 2008.

The company also said it has named David L. Bere as its new president and chief operating officer effective Dec. 4. Bere has been a member of the company’s board of directors since 2002 and will remain on the board.

The store closures make way for the retailer to open about 300 new stores in fiscal 2007 and another 400 in 2008. Dollar General also plans to relocate or remodel 300 stores each year, with a higher rate of about 700 new store openings in 2009.

The company did not disclose how many workers would be affected.

Under its new inventory strategy, Dollar General plans to sell off some $300 million in older merchandise to make way for newer products that are in season.

Despite the hefty markdowns, the retailer said the change will improve the appearance of its stores and will ultimately result in higher sales and lower employee turnover.

“We believe our new real estate strategy and tools enable us to more accurately identify which stores we need to open, close, relocate or remodel …”

“Long-term, we believe this model still provides the potential to grow square footage by as much as 10 percent per year,” said Kathleen Guion, division president of store operations and store development.