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CHICAGO -- After naming David Bere as its new president this week, Dollar General announced plans to close approximately 400 underperforming stores and use $138 million in charges to enliven its low sales at its discount stores through inventory cleanup, Reuters reported.
Recent quarters revealed that Dollar General has fallen behind its competitor, Family Dollar Stores. Shares for the company are down 12 percent for its year-to-date, while Family Dollar shares are up by the same amount. Analysts have asked the company to dispose of stockpiles of stale inventory and pace its store expansion to improve performance, the report stated.
The stores will be closed next year and excess inventory is expected to follow, the company said. It also adopted the policy of getting rid of inventory by having clearance sales and markdowns, instead of current strategies of packing away unsold inventory, leaving it with high amounts of hard-to-sell items, Reuters reported.
New store openings will also slow down, halving 2006's numbers, to 300 new stores for fiscal 2007. In fiscal 2008, 400 stores are expected to open, and the following year it will be up to 700 stores, the company said.
Although dollar stores have been one of the fastest segments in retail for store count growth, they have suffered from sluggish same-store sales in recent years. Dollar General in particular, has been adding more low-margin consumables like fresh produce to its product mix, in an attempt to increase traffic, but also negatively impacting profit margins.