Dollar General: Low-End Focus, High Return : Retailing: Profit at the chain, which serves mostly working-class customers, jumped a whopping 47% to $21.5 million last year.

Learning the secrets of success is as simple as understanding the difference between a mule and a man, Dollar General founder J. L. Turner once observed.

“A mule’s smarter than a man,” Turner said. “He’ll always return to his stall. But a man thinks he can go on to other things.”

Forgetting the urge to wander--just concentrating on the everyday--has proven fruitful for Turner’s 23-state empire of low-end retail stores. While most retailers grappled with the recession, Dollar General Corp. was ringing up a record $754.4 million in saleRetailing: s in the fiscal year ended Jan. 31, up 16%. Yearly profit rose a whopping 47% to $21.5 million.

“By any measure you can look at, they had a great year,” said analyst Anne Carlisle of Equitable Securities in Nashville.

“We’re staying in our stalls, thank you,” said Chairman Cal Turner Jr., grandson of the founder.

The no-frills retailer, which competes with the likes of Wal-Mart and Kmart, sells items like toothpaste, toilet paper and laundry detergent stacked on simple shelves or into bins at its 1,535 stores. The most expensive items are winter coats--about $35.

Dollar General targets a narrowly defined market: Its average customer is a working-class, 25- to 45-year-old woman earning less than $25,000 a year.

“We consider ourselves to have lower-income customers than anybody else in the business,” said Turner, 52. That means “our customers are the smartest shoppers in the world.”

Other discount retailers have used a similar formula for success. Family Dollar Stores Inc. of Charlotte, N.C., whose nearly 1,800 outlets in 29 states appeal to the same customers, increased sales more than 20% the past six months. Some smaller regional discounters have also done well.

Yet not all downscale retailers are flourishing. McCrory Corp., known for its five-and-dime stores, recently filed for bankruptcy court protection from creditors. Part of McCrory’s problem is it lacks the narrow focus that has helped Dollar General and Family Dollar thrive.

Dollar General does not honor credit cards and accepts checks for only the amount of purchase. Most stores are located not in cities, but towns of 12,000 to 15,000 people.

The company does offer some of the cheapest items around. Simple signs lure customers into stores that may offer Levi’s jeans for as low as $15. Four pairs of men’s tube socks sell for $3. Bath towels are three for $5, and three rolls of paper towels cost $1.

All items are sold in even-dollar amounts.

“The even-dollar has zing with the customer. It has operating simplicity,” Turner said.

Simplicity is the key to the chain that began 52 years ago with the slogan “Nothing over $1.”

J. L. Turner spent 10 years on the road as a wholesale grocery salesman before he and son Cal Turner Sr. put up $5,000 each to found J. L. Turner & Son Wholesale. The two sold $65,000 worth of goods their first year.

The company evolved by 1955 into Dollar General and went public in 1968. Its stock, traded over the counter, has recently sold for about $26, up from $10 last year.

Simplicity is still its trademark.

“It’s nothing but remembering what my father and grandfather had been taught in the hills of Tennessee and Kentucky,” Turner said. “First, be in stock with the fundamental living requirements, then add other things.”

“Other things”--which don’t sell well with the retailer’s customers--include contact lens solutions and automatic dishwasher detergent. Company sales figures show that Dollar General customers don’t wear contact lenses, and they wash their dishes by hand.

They do use motor oil that sells for 75 cents a quart.

“Some of our customers use more oil than gas in their cars,” Turner said.

Dollar General has also benefited from management changes, friendlier store clerks and a smoother distribution system, Turner said. In 1988, the company streamlined the distribution system so store managers could operate on a two-week delivery cycle.

Turner believes that the recession drove some customers to his no-frills stores.

“Our customers have been in recession for some time. The middle class is just now feeling it,” he said.

But stockholders are feeling good about now. Dollar General just declared a 5-for-4 stock split, and analysts predict that it will produce earnings per share of $1.20 this fiscal year, versus $1.02 last year.

The company thinks it can do even better.

“For all of fiscal ‘93, Dollar General expects to exceed analysts’ projections of $1.20 by five to seven cents. I’d say Dollar General is very conservative about putting numbers out there they can’t reach,” Carlisle said.