Dollar General Corp has appointed one of its directors as its new president and put in place a store revitalisation strategy that includes the closure of about 400 units, the upgrading of remaining stores and a more aggressive plan for coping with markdowns.

David Beré, a Dollar General director since 2002 and the former president and chief executive of Bakery Chef Inc, has been named president and chief operating officer, effective 4 December.

He will remain on the board and report to David Perdue, chairman and chief executive of Dollar General, who previously held the titles of president and COO as well.

Among the highlights of the plan outlined by the Goodlettsville, Tenn-based retailer on Wednesday (29 November) were the closure of underperforming stores, a slowing of expansion plans through fiscal 2008 and an elimination of Dollar General's "packaway" inventory management model by the end of the next fiscal year.

The company, which currently operates 8,276 discount variety stores, also announced plans to buy back up to US$500m of its stock over the next two years.

Collectively, the plans are meant to bolster profitability and, according to numerous analysts and other experts, lift stock performance that has left the variety store operator vulnerable to a possible takeover.

Closing at $15.70 a share on Wednesday, its shares have come back from the 52-week low of $12.10 established after the firm released lower second-quarter earnings back in August, but are still far from the $19.84 52-week high of about a year ago. Third-quarter results are scheduled to be released on 12 December.

In a research note to clients Wednesday, Goldman Sachs analyst Adrianne Shapira wrote: "We believe that Dollar General has unveiled an improved strategy, although we continue to remain concerned about the company's ability to execute.

"Management is saying all the right things - we have advocated an increased focus on returns at existing units with a clearer strategic plan. However, we remain skeptical - prior strategic shifts that were applauded by the Street in 2003 didn't turn out so well.

"We expect results to be severely pressured for at least the next four quarters as fiscal 2007 will be billed as a transition year," she concluded.

The plan calls for a shift towards higher margin merchandise categories, including apparel and home and seasonal merchandise, more attractive stores, faster turnover and greater merchandising flexibility.

In the second quarter, apparel accounted for just 8% of sales - $179.3m of its $2.25bn in revenues.

In addition to the 400 closures, Dollar General will slow its store opening pace in the next two years, to between 300 and 400 units a year from the current 600, but plans to resume its more normal pace beginning in fiscal 2009.

Kathleen Guion, division president of store operations and store development, said: "We believe our new real estate strategy and tools enable us to more accurately identify which stores we need to open, close, relocate or remodel, leading to a more strategic portfolio of high-potential stores and allowing our operations team to better focus and deploy resources where near-term opportunities are greatest.

"Long-term, we believe this model still provides the potential to grow square footage by as much as 10% per year," she added.

Dollar General expects pre-tax exiting costs associated with the real estate plan to total about $74m, about $16m of them recorded in the third quarter of this year. Of the total, $53m will be cash charges, $38m of these related to lease terminations.

The company also announced Wednesday that its same-store sales during the four-week November period were up 2.2% while overall sales rose 7.1% to $735.2m. Sales of apparel and home products fell during the month, however.

By Arnold J Karr.