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Local Criticism Mounts As Dollar General Expansion Intensifies

Dollar General

Dollar General has quickly become a dominant force in brick-and-mortar retail, and it is still gaining strength.

The discount retail chain is on pace to open 975 stores this year and projects it will open 1,000 next year, a pace of roughly 20 per week, CEO Todd Vasos told investors on its Q3 earnings call Thursday.

Dollar General has been rewarded recently for its incredible pace, with the company reporting nearly $7B in net sales the past three months, an 8.9% year-over-year increase.

It has also renovated around 1,000 older stores, 650 of which will include fresh produce, while more than doubling its carrier trucks and adding a fifth major distribution center for its own private-label frozen goods, Vasos said on the call. 

Despite that capital expenditure, DG recorded an 11% increase in operating profits from Q3 last year, Chief Financial Officer John Garratt said.

One of the primary drivers behind the brand's success has been its central status in rural and low-income communities across the country. As rising income inequality requires a growing number of families to spend as little money as possible, more households are turning to the lowest-priced option available, CNBC reports.

By expanding so aggressively with bottom-of-the-market prices, some believe dollar stores have been crowding out traditional grocery stores, which have been closing in low-income areas of cities like Birmingham, Alabama, the Institute for Local Self-Reliance reports.

Some local governments have argued that DG does more to create food deserts by targeting majority black and low-income neighborhoods.

Birmingham is among a growing number of cities that have either banned or severely restricted such stores from opening, according to the ILSR. But as perhaps the largest force of expansion in an industry that has seen record closures this year, low-cost stores can seem like the only option in some areas.

DG's produce initiative, which it will continue through at least 2020, is meant to combat the perception that it has a negative impact on community health. The company also is beginning to resemble grocery stores by adopting integration with the internet. The DG app allows customers to scan items and checkout on their phone in some stores, CNBC reports.