NASHVILLE, Tenn. — Discount retailer Dollar General Corp. said Wednesday it plans to close 400 stores next year and open about 300 new locations to improve profitability.
The plan will cost about $138 million, with $74 million related to store closings and $64 million for higher markdowns to expedite the move away from its "packaway" inventory management model, as well as other expenses.
The "packaway" model keeps products on the shelf longer. Under its new inventory strategy, Dollar General plans to sell off some $300 million in older merchandise to make way for newer products that are in season.
Dollar General did not specify where the new stores would open and which stores will close.
About $80 million of the costs will be booked in the third quarter ended Nov. 3.
In the most recent quarter, Dollar General reported a 40 percent decline in profit on increased costs, despite slightly higher sales.
Dollar General shares fell $1.01, or 6.04 percent, to close at $15.70 on the New York Stock Exchange.
"These strategic changes are designed to enhance the shopping experience for our customers and put the company on a solid foundation for profitable and sustainable growth in the future," said David A. Perdue, chairman and CEO. "Fiscal 2007 will be a year of transition for us as our team will be highly focused on executing this plan."
The company also announced plans to repurchase up to $500 million of its outstanding common stock over the next two years in a buyback that expires Dec.