Dollar General Accounts For 80% Of All New Store Openings In The US

Tyler Durden's picture

One week ago, when looking at the latest Fitch forecast of retailers most likely to file for bankruptcy next, we listed the hundreds of store closures already announced in 2017 between various bankrupt and still solvent retail chains.

Declining consumer demand for traditional retail venues and deteriorating financial results aside, we showed the simple reason for the persistent pressure on traditional "brick and mortar" stores to restructure with the following chart which showed that North America has a glut of retail outlets, as well as far too many shopping malls, something which is becoming apparent as sales per capita decline. On a per capita basis, the US has roughly 24 square feet of retail space per capita, more than twice the space of Australia and 5 times that of the UK.

But what about new store openings? After all, on a net basis the US retail industry has to still be growing. Here we have some good and bad news.

First the good news: according to a recent analysts by Bank of America's REIT team, in which the bank analyzes both store openings and closings for the same sample of 33 retailers that its have analyzed since 2007, it finds that the projected net new store count for 2017 is 1,041, which is lower than last year’s actual 1,109. While the net number of 1,041 openings this year is lower than the 10-year average of 1,386, "nevertheless the numbers are still positive" is how BofA spins the silver lining.

Some more details from the BofA report:

For the group of 33 retailers, we estimated 1,128 net new stores, but the actual figure was 1,109 (a negative variance of -1.7%). Projected net store openings were close to the actual count by year-end. As mentioned, this number is somewhat lower than the previous 10-year average, which we believe is due to historically low levels of ground-up development, as well as caution from retailers who remained focused on margin over market share. Table 2 shows projected vs actual net new store openings for 2016.

 

 

In our analysis, net new store openings for open-air formats (strip centers) still appear stronger than malls for 2017. Open-air retailers plan to open a net new 1,111 stores, while in the mall space, retailers plan to decrease the net new store count by 70 stores. The decrease in the mall categories is primarily due to the closing of department store anchors. The stronger net store result of open-air retailers occurred despite a pick-up of store closings in the open-air categories. The store closings were mitigated by a number retailers which actually increased their “open-to-buy” (such as off-price apparel stores). See Table 3 for net new stores by retailer, by year.

Now the bad news: as the following tabl shows, of the 1,041 stores expected set to open in 2017, 80%, or 810, belong to the one retail chain that focuses exclusively on America's poortest, i.e., Dollar General.

Putting BofA's findings in context, US retail is still at least somewhat alive, but only thanks to America's poorest, seemingly a market of still largely untapped growth potential. In fact, of the nearly 7,800 net new stores opened since 2008 per BofA's sampled data, a whopping 76%, or 5,936, were Dollar General Stores.

It seems that in the otherwise gloomy US bricks and mortar industry, a source of tremendous growth continues to shine: catering to America's growing poor.

As for how Dollar General itself sees the US retail landscape, read "Dollar General's Startling Admission: Half Of U.S. Consumers Are Feeling More "Dire" Than Ever"

"Growth" reality aside, there is one potential saviour for US "bricks-based" retailers: e-tailers opening more stores. Here is BofA:

We would be remiss if we did not also mention the retailers that once sold their products exclusively online and now occupy their own physical space. This year we expanded our analysis of new store openings to include this group, which we refer to as e-tailers. We first looked at a list of 40 online retailers that once existed only online but now have over 280 stores in the U.S. Then we of those e-tailers that plan to add more stores in 2017 and beyond. These 12 e-tailers include names like Amazon, Warby Parker, Bonobos and Indochino. This group of 12 ended 2016 with just under 200 stores and plans to open another 175+ this year (Table 4). Amazon said it will open as many as 400 bookstores; Warby Parker co-founder Neil Blumenthal said he could envision a future with 800 to 1,000 physical stores, and Bonobos founder Andy Dunn said he plans to have 100 stores by 2020. Indochino, a men’s fashion retailer, currently has 13 stores, and CEO Drew Green plans to get to 150 stores by expanding in top-tier malls like SPG’s King of Prussia. These findings support our thesis that tenant demand remains high for bricks and mortar retail high across a variety of tenants, including those once found exclusively online.

It remains to be seen just how successful such "clicks-to-bricks" conversions will be.

h/t Adam Johnson

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OKUSA's picture

Probably 80% of jobs created too.

knukles's picture

Distribution in Action!

Ignatius's picture

Oh, yeah, Dollar General is enjoying their sales and growth profile now, but just wait till Alibaba opens China Second Hand and we'll see who's celebrating then.

cossack55's picture

Still waiting for the return of the 5 & dime

Paul Kersey's picture

And there is no shortage of thrift stores, consignment shops, stop and robs and used tire stores. Main Street in America is becoming Tobacco Road.

El Oregonian's picture

Dollar General is the 2017 version of the 1960's Disco Stores.

gold rubeberg's picture

Sounds like this little town. As it happens, a Dollar General just opened up on our Main Street a couple years ago.

And last fall practically every second or third home had a Trump Pence sign in the yard.

JuliaS's picture

I frequent thrft stores myself. On the weekends they are absolutely flooded, much like the dollar stores that now sell food. Other places - either deserted or stuffed with wanderers who pretend to shop while merely avoiding the heat. Few Best Buys that are still operational - I see staff outnumber patrons 2 to 1. Sustainable? Ha!

Kids still roam happily, glued to their cell phones. Looks like they don't have a clue what's going on. Shame on them and on their parents for tolerating these imbecils.

jenniewadeguy's picture

Dollar General IS the new 5 & dime.  Does this need to bite you in the arse before you can see it?

yogibear's picture

Congrats Federal Reserve! Smashing down the lower 2/3rds.

Transfer of wealth to the banksters! Working as planned.

political_proxy's picture

What about walmart, the upgraded version of DolGen?

Uncertain T's picture

In my rural mountain area, Dollar General is kicking Wall Mart's butt.

There have been 4 store openings in the past few years.  All of them are located in the small towns once only supported by local grab and go shops with gas.

It's simple.  Why drive 30 minutes or more to Wall Mart when there is a Dollar General 5 minutes away.

Justin Case's picture

Have look at the stock.

Sudden Debt's picture

and just wait untill a mastermind starts opening 99cents stores next to those dollar stores...

Czar of Defenestration's picture

Wow! AND, it's almost as significant as, well, the EARNING POWER OF EACH COMPANY's STORE.

 

Dollar Store?

The name speaks for itself.  TRASH.

subversion's picture

America and the mystery of the vanishing middle class.

I am Jobe's picture

Now they can shop till they drop. Yippie

Sudden Debt's picture

The definition of an American:

1. HE ONLY WANTS TO PAY THE MINIMUM PRICE FOR EVERYTHING

2. HE EXPECTS THE HIGHEST SALARY

3. HE DOESN'T GIVE A FUCK IF OTHER PEOPLE'S JOBS GET EXPORTED OVERSEAS AS LONG AS HE CAN BUY CHEAP CRAP

4. HE IS SHOCKED WHEN HE'S FIRED AND HAS TO TAKE A MINIMUM PAYING JOB TO SERVE CHEAP CRAP TO OTHER AMERICANS.

 

 

rejected's picture

5. and the biggest assholes on the planet.

    Okay,,, exceptional assholes.

b-sugar's picture

ZH had an interesting read a while back about retail store sale VS .com sales. it pretty much balance itself out. 

 

TheSilentMajority's picture

I'd buy that for a dollar!

peippe's picture

upped for the RoboCop reference.

one movie just slightly ahead of it's time.

Omni Consumer Product's picture

The 6000SUX.

An American Tradition.

OKUSA's picture

Ooo you're gonna have to be quicker than that.

HoyeruNew's picture

but wasn't "Amerika" the land of free enterpruse and freedom and democracy? Didnt everyone have the same opprtunitues to get rich if only they worked hard??? Or have I been told fables??????????

BWAHAHAHAHAHHA!~

Silver Savior's picture

The work hard and get ahead line is the biggest crock of bullshit. I have seen people lazy as fuck get ahead a lot more. Just have to know people and be in the right place at the right time.

Gaius Frakkin' Baltar's picture

And not be a "priviledged" White man. That helps too. Which is why so many are driven to the Alt Right.

The empathy the Boomers have shown younger White generations will be reciprocated when they're geriatric and in need of care.

Bigly's picture

Dollar General...Not even Dollar Tree?

Prepare for the rapture

JuliaS's picture

Dollar General and Dollar Tree, soon to become "Dime Civilian" and a "Penny Stump".

I am Jobe's picture

American Exceptionalism

Silver Savior's picture

With the cost of everything I don't see how they can sell half the things they do for a dollar but I am not complaining. The only problem is they are usually on the strip mall tucked away so you have to spend the gas to get there. I wish there was one next to my closest expensive Lucky's market.

Donate Moar's picture

Its a mindset for the unobservant. Tell them its cheap and they believe it without thinking.

Not everything in the store is one dollar (!), and some things are extremely overpriced.

Its mostly junk, and non-edible edibles.  It is NOT on my loot list for that reason,

and neither is its neighbor Circle K.    Shelfs of sugar and shit.

The store manager makes $800 weekly, but she deals directly with the

ignorant masses; a skill I refuse to learn.

 

clade7's picture

I buy my automotive oil from the DG...$3/qt!...I have a 01 Chevy Prism that seems to be a two cycle kind of deal?...it eats 1qt oil/8gal gas!  A 32:1 mix ratio if I calculate it accurately, like a chainsaw or a weedwhacker!....Luckily, theres a handy little fill hole in the top of the motor, and it apparently self mixes from there! 

 

Just like one of those fancy bass boat motors!  No mess or fuss of premixing!  And you never have to change the oil either!   Just dump in a qt every 250 miles or so and call it a day!  I think this one snuck out accidentally through the R&D department, its an amazing little rig!  31+mpg!

 

Sure its ugly and smokes, half rotten, not a chick magnet in any terms, but always reliable and ready to go!...Just like me!  I occasionaly get some Marie Callender Chicken pot pies for 'Date Night' when they come on sale from the DG..Big time treat!

Obadiah's picture

Yeah thats a toyota corrola under those badges  great runners

clade7's picture

Right Obie!  I bought her for $1200 cash off of CL several years ago!  The only thing I have done is change the brakes myself, the serp belt while I was at it, and the wiper blades!..I figure if I keep oil in it, I will put 300k on this rig!  I've never once run it through a carwash!  Why bother?  About once per year I open all the doors and blow it out with a leaf blower, and use the squeegee down at the StopNRob to mop her off during a fillup a few times per season when the pumps aint busy...

 

The Wife hates my 'Rosie' and said..."I'll never be caught dead in that thing!"  An odd and confusing statement?  Since the trunk is more than ample for that task should it come to it someday.....I need to start looking for some new 13" tires soon though, I'm running on the originals she was shod with when I bought her and the tire store guy said that particular style and brand is no longer available....She still runs straight as a string, all the way to the Gulf and back...

Last week, the junkyard guy said the 13" tires are hard to come by now a days off of wrecks and stuff....Its a point A to B as fast and cheap as possible kind of vehicle.....Nobody would ever car jack a guy or break into her or even consider stealing this rig...No cop would ever consider pulling me over to issue a speeding ticket for fear of it getting tossed out in court! 

I employ the Wifes used dryer sheets for an air filter even....Yeah...I'm a Dollar General kind of guy!

peippe's picture

try some of those 'carbon busters' solvents in the oil, 

control rings are probably stuck in place, that engine flush may save $$.

I don't run like that anymore, back when there was 'coupon oil' @ 49 cents a quart I played that game, 

at 3, get some chemicals & experiment, you  might get lucky, save hundreds if you get those oil rings freed up.

any_mouse's picture

Chevy Prism (Toyota Corolla).

I had a Geo Tracker (Suzuki Sidekick) and it had the same thirst for motor oil.

What else did the Prism and Tracker have in common?

GM.

Obadiah's picture

Holy sheeeet the house of cards IS falling

debtor of last resort's picture

Maybe some btc profits will keep the middle class float.

Obadiah's picture

either that or tulips or the lotto

True Blue's picture

South Seas stawks.

Anyone else notice that some of the other numbers seem wildly optimistic? 40 new American Eagle stores after the previous three years were -37, -15, and -3? Macy's at -17, -42 and -65 has suddenly turned around and will close none? TJX cos (?) is opening 135 stores (somewhere?) You can't swing a dead cat without hitting a Wal Mart -and they're opening 52 more this year? Are they putting law schools in 'em now or what?

The cup is only 'half full' because there's a stool sample floating in it.

Silver Savior's picture

Those profits are helping me save. It feels really weird making g money and not doing anything. lol.

hutnela's picture

Sooo, roughly 8,000 businesses closing 1,000 opening and most are DG's? ahhh, economic recovery... It makes sense because obamanomics... or else you're a racist...

OKUSA's picture

Start off as a cashier or stocker and before you know it you will be a store manager making a lofty 25k/year.

Silver Savior's picture

25k is really not that bad if you have very few obligations. Less is more. Most people working the grind for more just keep needing more money to service debt and buy cheap stuff. Is it really worth it to have more money? Think it's all an illusion.

clade7's picture

Helluva deal!  Plus, all the open bags of Ramen Noodles you can eat!  Expired jugs of Orange juice you can drink!  Dented cans of soup?  Have a grill up on the rooftop and live like a King!  Hell, during inclimate weather, you could sleep right there in the toy department on the shelf snuggled in with a bunch of Beanie Babies!  Freshen up in the toiletry aisle!  The DG here sells BEER even!  Have at it and write the loss off as shoplifting!  Or, if you are not a drinker, just huff a spritz of paint or something!  The sky is the limit!

 

Hell Yeah!  Being the Mgr of a DG would be the absolute tits!  Like Strother Martin advised his Son Chong,  "Goddamit boy!  Just bend and pick!  Start out on strawberries and work your way up to bananas!"

Silver Savior's picture

Dented cans of soup still taste the same as undented cans of soup :) Just thought I would point that out.