Dollar General opened its first store in Montana on Saturday, extending its reach throughout the U.S. With the latest expansion to the Treasure State, the discount retailer now has footholds in all 48 continental states, as well as Mexico.
The new location is in Columbia Falls, a town of about 5,500 people in northeastern Montana’s Flathead County. Construction is underway for stores in two other counties, with openings planned for later this fall, the company said in a press release.
The new stores represent an incremental step in Dollar General’s strategy of rural expansion. With over 19,000 locations nationwide, Dollar General is already the nation’s largest retailer by store count. The company opened 427 new stores in the first half of the fiscal year—an average of more than two openings every day.
“The company has indicated no intention to pause its development or store remodeling aspirations,” said Sean Dunlop, an analyst for Morningstar, noting that the company’s current headwinds come from issues like inflation and inventory management, not the costs of expansion.
Many retailers have reported a gloomy earnings season, due to unexpected levels of theft and reduced spending power among their consumers. Although Dollar General underperformed profit forecasts, executives have only slightly scaled back their growth plans. Of the 1,050 new Dollar General locations that were originally slated for 2023, company executives still plan to reach 990 by the end of the year.
And those new stores were a bright spot in the latest earnings report. Newly-opened stores drove a 3.9% increase in Dollar General’s net sales in the three months ending Aug. 4, helping offset weaker traffic and sales at existing stores.
Rural communities are central to Dollar General’s strategy, the company said in its second-quarter filing. Four out of five Dollar General stores are located in towns of fewer than 20,000 residents, where long driving distances increase the cost of last-mile delivery and the inconvenience of visiting bigger retailers.
“We feel really good about having 80% of our stores in these small communities that we can serve with a quick in-and-out shop,” said Chief Executive Officer Jeff Owen, at an analyst event in September. “Getting her (the customer) in and out and on her way is incredibly important to us.”
Rising gas prices are an additional benefit, he added, since they give shoppers more reason to stay local.
But Dollar General does not have unlimited room for expansion, especially in larger communities with more options.
“As the firm develops beyond its core markets,” said Dunlop, the analyst, “it’s quite likely that store-level returns decline, both because the real estate will be more expensive and because the competitive environment will be stouter.” In other words, Dollar General might have a harder time if there are other retailers next door.
Markets were closed when the Montana opening was announced. Dollar General’s share price rose on the news, from $103.74 Monday morning to close over $107 on Wednesday.