Making Change
At Dollar General, CEO Rick Dreiling is conquering what he calls retailing’s last wild frontier.
Gregory Miller
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E-mailOn a brilliantly sunny June afternoon inside the Dollar General Corp. (DG) store in Madison, Tenn., a quiet suburban town northeast of Nashville, spacious, brightly lit aisles display neat rows of household products, food, apparel and personal-care items with almost obsessive uniformity. The friendly salespeople at the front of the store are outfitted in crisp yellow polo shirts and black pants, coordinating with the company color scheme. Down one aisle, bottles of bleach are so precisely arranged (eight across, three deep, on three shelves) that the vision would make a drill sergeant smile.
Granted, the Madison store is among the chain’s most organized because of its location near company headquarters, but the scene certainly makes Dollar General Chairman and CEO Richard “Rick” W. Dreiling happy. “How are ya?” he eagerly asks a young saleswoman as he shakes hands and briskly makes his way through the store. He stops to admire a new line of shampoos and conditioners, part of the Pantene brand, owned by The Procter & Gamble Co. (PG). To customers it’s a nice display of shampoo that’s been getting plenty of TV advertising lately — and sells for about $1 less here than it does at some retail drugstore chains. But to Dreiling, 56, it’s validation. “We’re getting all the national brands when they first launch instead of having to wait months,” he says.
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It wasn’t always this way. When Dreiling, a 40-year retail veteran, was named CEO in January 2008, a typical Dollar General store was crowded and dimly lit, with a bullpen of checkout registers choking the entrance and shelves clogged with duplicate and sometimes discontinued items. Behind the scenes, it wasn’t much better. Same-store sales growth — growth in sales of stores open a year or more, an important measure of a retailer’s performance — had slowed to 2 percent (from north of 7 percent in fiscal 2001), and profits had plummeted by 60 percent, to $138 million. “Let’s just say this was a jewel of an asset that was being under-managed,” he says.
Buyout firm KKR & Co. LP (KKR) clearly felt the same way. In July 2007, it acquired Dollar General for approximately $7.3 billion and took the company private. Michael Calbert, a KKR partner who oversees the Dollar General investment (the firm, along with The Goldman Sachs Group Inc. [GS] and others, still owns approximately 80 percent; the remaining shares were sold to the public in an IPO in November 2009), describes the chain as one “that had not been managed effectively for a number of years, but which had a great brand that delivered exceptional value to consumers on the everyday items.” In Dreiling, he says, KKR found the “perfect choice” to turn the retailer around.
Back in the 1990s, KKR had an investment in Safeway Inc. (SWY), the grocery store chain where Dreiling had been executive vice president earlier in his career. “We’ve known Rick for 20 years and had followed him closely,” says Calbert, who sits on Dollar General’s board. “He brought a wealth of operational experience, which the company truly needed, but also a respect for the culture and history of Dollar General.”
