Dive Brief:
- Dollar General has been making inventory adjustments in a bid to “make more room for what matters on the shelf,” CEO and Director Todd Vasos said on a June 3 earnings call.
- The discount retailer slashed 1,000 SKUs last year and aims to cut more this year, the CEO told analysts.
- “SKU reduction has been a big win,” Vasos said, noting that prioritizing SKUs with the fastest turnarounds increases Dollar General’s top line and confidence. For context, the company reported a 5.3% year-over-year sales increase during it latest fiscal quarter.
Dive Insight:
Dollar General’s effort to improve inventory management is part of its strategy of building a longer-term buffer against stock damages, Vasos said. This has led Dollar General to rethink how it buys and allocates goods, resulting in higher in-stock levels and lower overall inventory levels.
“We have done a lot of work and will continue to do a lot of work on improvement and optimizing days of supply, which really helps to mitigate damages,” Vasos said.
In Q4, Dollar General reported a 6.9% decrease in inventory levels per store after its removal of 1,000 SKUs. The effort has helped make stores and distribution centers more productive, Vasos said in March.
Dollar General is also scaling back its use of temporary warehouses to further boost distribution capacity and efficiency. As of December 2024, the retailer had closed 15 of its 18 such sites. It plans to close the remaining three in 2025.
During a March earnings call, Vasos said that Dollar General’s next focus is case pack optimization. He explained that this process ensures that products go to retail shelves as soon as they reach a store, cutting down on touch points from the time an item is stocked to when a customer picks it up.
“When you think about 20,000 stores across our network, if I can save a few touches per store per day, that adds up to very meaningful numbers at the end of the day,” Vasos said at the time.
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