Dollar General plans its IPO

August 24, 2009 – 12:30 pm – No Comment

The discount retailer Dollar General is planning its initial public offering in an attempt to raise up to $750 million in a preliminary filing. However, it is unclear how the proceeds will be spent. What many investors do know is that a large portion of the money will be used to pay down the company’s debt.

There will also be a $200 million dividend paid to the existing shareholders.

Dollar General has been doing particularly well in the current recession due to the fact that many consumers have been looking for a way to save money and make their dollars stretch a bit further. Dollar General isn’t like actual dollar stores like the Dollar Tree. Dollar General sells name brand goods like Clorox, Herbal Essence, and Huggies. The stores feature prices that are sometimes cheaper and the stores are small so that shopping is quicker and more manageable to shop in.

Sales have grown 13% in the last quarter for the discount retailer. The growth means that Dollar General has become one of the big guys in the retail game. Wal-Mart sales have declined 1.2% in the most recent quarter and even CostCo’s sales were down 8%.

Unfortunately for Dollar General, the debt the company owes is something that keeps investors at bay. The company’s debt stood at $4.1 billion as of May 1st. The company’s lease obligations aren’t even factored into the total debt. Of the 8,577 stores that the company runs, most of them are leased.

The amount of debt and lease obligations could be something that holds back some investors from putting their money into the company, regardless of the amount of profits and sales the company has realized in the past year.