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GOODLETTSVILLE, Tenn. -- Discount retailer Dollar General Corp. here said yesterday it plans to open 30 more Dollar General Markets -- its experimental concept that's 50 percent grocery and includes meat, deli, dairy, baked, and frozen foods -- in fiscal 2006.
The news came as the chain posted lower net income of $64.4 million, or $0.20 per share, for the third quarter ended Oct. 28, 2005, compared to net income of $71.1 million, or $0.22 per share, in the third quarter of fiscal 2004.
Most of the chain's existing 38 Dollar General Markets, which average around 18,000 square feet, are in Tennessee and Kentucky. The retailer entered the Orlando market with the format earlier this year when it opened one in a former Kash 'n Karry site.
Dollar General did not say yesterday whether it would enter new markets in 2006, but it did say that some of the planned Market units would come from conversions of traditional stores. In fiscal 2006, the company expects to open a minimum of 800 new traditional Dollar General stores.
Net sales for the third quarter were $2.1 billion, a 9.5 percent increase over the year ago period. New stores contributed to the rise, while same-store sales were up 1.4 percent.
Dollar General's gross profit as a percentage of sales declined to 28.1 percent from 29.5 percent for the comparable period, which the company attributed to lower sales in seasonal, home products and basic clothing categories, which have higher than average mark-ups; increased markdowns as a result of an initiative to reduce per-store inventory; higher distribution and transportation expenses primarily attributable to increased fuel costs; and the impact of its decision in 2005 to increase the number of departments utilized for its retail inventory method gross profit calculation.
During the quarter, Hurricanes Katrina, Rita, and Wilma affected the company in the form of store closings prior to and during the hurricanes' landfalls, as well as after the storms due to power outages and damages sustained. The most significant storm-related company losses were related to merchandise inventories, furniture, and fixtures, which were primarily offset by insurance proceeds. Dollar General said the net impact of the hurricanes was not material to the company's financial position, liquidity, or results of operations in the third quarter.
Dollar General added that November same-store sales continue to be affected by a combination of higher fuel prices and aggressive advertising and marketing by its competitors. As of Oct. 28, the company operated 7,821 stores.