Wall Street Gets Rich From Dollar Stores
Dollar General, like Family Dollar, traces its roots to a single store in the South in the 1950s and it went through rough patches in a near-four decade run on public stock markets. Dollar General's founding family, however, is no longer involved with day-to-day operations.
From 1968 to 2002, Dollar General operated with family management. It survived only five years independently once third generation CEO, Cal Turner Jr., ceded the company's reins amid an accounting scandal.
In came Wall Street.KKR, an expert private equity firm in the business of turning around underperforming retailers, was in the process of expanding its retail portfolio when Dollar General hit hard times in the 2000s. According to Jason Kelly's The New Tycoons, KKR saw the deal also as helping insulate it from a U.S. economic downturn. Mike Calbert, an executive at the firm, used Dollar General's falling stock price in 2006 to make an offer for the company. The parties agreed to a $6.9 billion takeover in March 2007. Dollar stores struggled during the mid-2000s, in part, because consumers could afford to trade up to higher-cost retailers. In more troubled times, KKR believed Dollar General would win new customers. Further, Calbert and KKR's team had a plan in place to fix operational issues plaguing Dollar General, such as poor inventory management, weak zone pricing and inefficient store layouts. Dollar General proved to be such a well-conceived investment by KKR it was one of the first large pre-crisis buyouts to go public in the wake of the 2008 financial crisis. By the time KKR exited Dollar General in late 2013, the fund had made over five times its money, according to calculations by Oppenheimer analysts.