Dollar store stimulus plan.

NEW YORK —While Sunday morning news pundits debate the effectiveness of the economic stimulus package that Congress and the Obama administration set in motion about a year ago, there can be little debate that the growth in the dollar channel is creating a bit of a stimulus package of its own. Sales are up, in sharp contrast to most other sectors of retail. And, while the state of the economy has caused many retailers to shutter some stores, or otherwise freeze capital expenditures, dramatically reducing expansion plans, dollar chains are adding stores—and jobs along with that.

The recession has reshaped consumer behavior, and many fear those changes will be permanent, long outliving the current economic downturn. “It’s no longer uncool to shop the dollar store,” as Rite Aid’s SVP business development Bryan Shirtliff noted during Drug Store News’ annual Issue Summit roundtable discussion in December. Increasingly, dollar stores are putting more emphasis on everyday consumable items, such as OTCs and health-and-beauty items—big national brands, too, not just the closeouts many dollar stores built their heritage upon.

Indeed, the down economy certainly has been good to dollar stores. It’s almost like the entire channel is on steroids.

Dollar General just last month announced plans to open 600 new stores in the coming 12 months. That certainly will add to the more than 20,000 dollar-channel outlets operating across the country.

Dollar General posted total sales increases of 13.1%, reaching $8.6 billion, and same-store sales increases of 10.3% for the three quarters ended Oct. 30, 2009. Average sales per store per sq. ft. were up 9% from the year-ago period to $192, the chain reported.

The second-largest dollar-store operator—Family Dollar, with 6,686 locations by year-end 2009—posted sales increases of 6% for the year ended Aug. 30, 2009, reaching $7.4 billion. Comparable stores were up 2.4%. Family Dollar expected to commit between $160 million and $180 million against capital expenditures for its fiscal 2010, an amount comparable to its fiscal 2009, during which the company opened 180 new stores.

At Dollar Tree, annual sales were up 12.6% to $5.2 billion for its fiscal year 2009, ended Jan. 30, with same-store sales up 7.2%. The third-largest dollar chain ended the year with 3,806 stores. For 2010, it plans to open 220 new stores and relocate another 75.

U.S. store count and trip comparisons 2001 vs. 2009Source: Nielsen Group
Retail outletStore count in 2009Store count in 2001% changeTrips per house-hold in 2009Trips per house-hold in 2001% change
Convenience143,997124,51615.61315-13.3%
Drug37,65840,102-6.11415-6.7
Supermarkets32,21131,1833.35972-18.1
Dollar stores20,78813,15158.1131118.2
Mass merchants6,4576,4210.61424-41.7
Supercenters3,4011,583114.8262030.0
Warehouse clubs1,20790733.1%111010.0%

Dollar General, for one, not only is growing stores; the retailer also is making a concerted effort to be more relevant to everyday drug store shoppers with a more consistent lineup of OTC and HBA brands.

“Our planogram updates in health and beauty contributed significantly to our sales growth [in the third quarter],” Rick Dreiling, Dollar General chairman and CEO, told analysts during a conference call in December 2009. “We introduced Rexall as our private brand in vitamins, expanded cosmetics and introduced a line of foot care products,” the one-time Duane Reade CEO added.

That Dollar General is suddenly making a concerted effort to be more relevant in health and beauty makes a great deal of sense, given the company’s present leadership team. Dreiling has been joined by fellow drug store vets Todd Vasos, chief merchant, and Larry Gatta, VP and divisional merchandise manager—the three previously worked together at Longs.

“There’s an opportunity in health and beauty [because] that’s more of a mainstay in what people buy,” said Todd Hale, SVP consumer and shopper insights at Nielsen.

Both Dollar General and Family Dollar also have expressed their commitment to branding and brands, Hale said. “They’re very focused on making themselves a real destination shopping trip, and being pretty successful at it during a difficult economy,” he said.

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