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Dollar General, the ultra low-cost US store chain owned by Kohlberg Kravis Roberts, reported a 13.3 per cent increase in its comparable sales during its first quarter, underscoring its position as one of the success stories of the US recession.

The retailer operates 8,460 small neighbourhood stores that sell an assortment of foodstuffs, household goods, clothes, toys and other items.

A quarter of its stock sells for $1 or less, and most of the rest of it is priced below $10.

In a regulatory filing the company said that “during this challenging economic period, value-conscious customers are relying on our stores for value and convenience more than ever”.

The strong performance compares with the negative sales numbers being reported by most US retailers and to the flat to low growth seen by leading supermarkets. Wal-Mart, the largest US mass discount retailer, reported a 3.3 per cent increase in comparable store sales in its first quarter.

Dollar General’s overall sales for the three months ending May 1 rose 15.7 per cent to $2.78bn.

Sales of “highly consumable” items such as food and household goods were up by more than 18 per cent, as it increased its offerings of convenience foods, drinks and expanded its low-cost private-label brands.

The recession has encouraged leading consumer goods companies to seek an ever-closer embrace with Dollar General and other low-cost dollar stores, which they once largely shunned.

The retailer’s current weekly newspaper advertising insert, for instance, is dominated by special sale offers on food brands from companies such as Kraft, and on brands from Procter & Gamble, including Tide detergent, Olay hand-wash and Gillette razors.

While other retailers have been cutting back on capital investment, Dollar General opened 104 new stores during its first quarter, and expects to open more than 400 by the end of the year, while also remodelling 400 others.

Rival dollar store Family Dollar, which has been investing in remodelling its 6,600 stores and expanding its grocery offering, reported a 6.4 per cent increase in comparable sales in its most recent quarter.

The retailer, which describes its core customer as “poor to just getting by” and earning less than $40,000 per year, says it has also seen an increase in visits from more middle-income customers.

Dollar Tree, which has more than 3,600 stores selling everything for less than $1, last week reported a 9.2 per cent increase in comparable sales in its first quarter.

Copyright The Financial Times Limited 2017. All rights reserved.
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