Dollar General could look to smaller acquisitions for growth

Thu Jan 22, 2015 5:41pm EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Sruthi Ramakrishnan

(Reuters) - Dollar General Corp (DG.N: Quote) could make smaller acquisitions and build its store footprint to better compete with Dollar Tree Inc (DLTR.O: Quote), which is poised to become the largest discount retailer after its acquisition of Family Dollar Stores Inc FDO.N.

On Thursday, Family Dollar shareholders approved a cash-and-stock deal to be bought by Dollar Tree for $8.5 billion, derailing Dollar General's $9.1 billion all-cash offer.

The deal, which will give the combined company more than 13,000 stores and more than $18 billion in annual sales, is not expected to hurt Dollar General's growth and competitive standing, analysts said.

Stifel, Nicolaus & Co analyst Taylor LaBarr said that Dollar General is now expected to focus on expanding its footprint of more than 11,500 stores, while Dollar Tree slows store openings to integrate Family Dollar.

The company also has a competitive edge for up to two years as Dollar Tree enters a period of financial and operational frictions related to the integration, he wrote.

Dollar General said in December it was on track to open about 700 stores in the year ending in January.

The company declined to comment for this story.

"With gas prices down considerably over the past two months and home heating bills likely to (be) far lower than last year, there are several reasons to be more optimistic on the sales front in the coming periods for Dollar General," Sterne, Agee & Leach analyst Charles Grom wrote in a note.   Continued...

The sign outside the Dollar General store in Westminster, Colorado is pictured December 4, 2014. REUTERS/Rick Wilking