At the time Dreiling took over Dollar General, Family Dollar was also worth approximately $4.5 billion, and it is still worth $4.5 billion today. With Dreiling involved, he can do for Family Dollar what he did for Dollar General, and maybe even quicker. The second area for value creation is with Family Dollar, but not to sell it as Starboard advocated, at least not immediately. By increasing that mix and merchandising the stores for optimal sales, these improvements could even be greater, as Dollarama discovered. Further, when DLTR trialed this strategy, they found a 6% same stores sale lift from only dedicating 10% of its square feet to items in other price points. Gross margins have increased from nearly 33% to about 40%, and EBITDA margins increased from roughly 14% to about 25%. Over the past ten years, average same store sales have increased from about 2% per year (prior to 2009) to roughly 6%. Dollarama has continued to add additional price points, with a $4.00 ceiling. In early 2009, Dollarama introduced $1.25, $1.50 and $2.00 price points and same store sales growth more than doubled due to increases in the average ticket and store traffic.
First, aggressively implementing a multiple price strategy, which has proven to work elsewhere. With a new team in place, two things can be done to create shareholder value. That CEO could even be current CEO Michael Witynski – it is too early to tell as he has only been CEO since July 2020 and working in Sasser's shadow the whole time. Bringing in Dreiling as chairman with a CEO he can partner with - like he did at Lowe's - should work great here. This is not surprising as it is very difficult for a new CEO to operate and make necessary changes with the old CEO looking over his shoulder. Bob Sasser was the company's CEO from 2004 to 2017 and has since been its executive chairman while the company is on its second CEO in the four years since Sasser. That player/coach structure is exactly what is needed at DLTR. Since then, Lowe's has returned 192.9% versus 71.9% for the S&P 500. As a player/coach, Dreiling partnered with an experienced CEO in Ellison (former chairman/CEO of JC Penney and senior executive at Home Depot for 12 years), and gave him the added benefit of his decades of experience and knowledge in a range of retail formats. After Dollar General, Dreiling, a Lowe's board member, strongly advocated that Lowe's select Marvin Ellison for the CEO job. In just seven years, Dreiling took the company's value from $4.5 billion to $25 billion, and it is now worth about $52 billion. But perhaps his biggest success was in 2008 when he was brought in by KKR to Dollar General. We believe these reports to be true for two reasons: (i) Dreiling is on the board of Aramark with Hilal and the two are working very well together there and (ii) Dreiling is the exact type of CEO that Hilal looks for in an investment like this.ĭreiling has had a successful four-decade long career, with success at Longs Drugs, Safeway, and Duane Reade. It has been reported that he is working with Rick Dreiling, the former CEO of Dollar General. In this case, we believe he has found the Hunter Harrison of consumer goods stores – someone who has grown up working every facet of the industry and has a proven record of creating value at the highest level. Hilal has a track record of creating shareholder value by bringing in a rock-star CEO, most notably at Canadian Pacific and CSX with Hunter Harrison. To stop the stock price's dive, and possibly to head off a rumored activist, the company announced that it would implement the multi-price point strategy and do a $1 billion stock buyback, even though it still had $1.5 billion of capacity on its previously announced buyback. 24 after the company reported bad earnings and guidance for two consecutive quarters due in part to ocean freight headwinds.
However, it is almost two years later and not much has changed.ĭLTR's stock traded as high as $120.37 on April 6 but fell to $84.26 on Sept. Starboard ultimately dropped its proxy fight for seats on the board after the company expressed openness to test multiple price points in its stores. In January 2019, they outlined two opportunities they felt the company should be pursuing – exploring strategic alternatives for Family Dollar, which the company owns, and evaluating and testing a multiple-price point strategy. Previously, Starboard Value was involved at Dollar Tree.