If disgruntled employees and customers can’t get Dollar General to clean up its act, maybe investors can.
That’s the basis of the latest in a wave of lawsuits brought by investors, who allege that the retailer deceived them into believing everything was going well, obscuring major problems managing inventory that resulted in sloppy stores and worn-out workers.
In his new federal complaint, plaintiff Justin Potter, a Dollar General shareholder, echoes many of the allegations made in other recent shareholder lawsuits. There are the unkempt stores that have led to OSHA violations. Overworked employees that have led to massive turnover. And mispriced items that have led to fines and further lawsuits.
Potter’s complaint seeks to identify the root cause of it all. He pins the blame on completely unnecessary items being ordered, warehoused, misplaced, thrown out, or ultimately unloaded onto stores that have no need for excess items, nowhere to put it all, and no employees to deal with it.
“Depending on what the numbers looked like at the end of a quarter,” the lawsuit cites a former employee as saying, “the company would buy unnecessary items to bring the margin way down or way up, depending on how they wanted the financial statements to look.”
And as the stock price tumbled once these problems became known, the lawsuit argues, investors ultimately paid the price.
The problems began with “extreme overbuying by Dollar General’s buyers without regard to demand,” the lawsuit alleges. “The company’s distribution centers were being sent 40-50 containers of inventory per day but unloading only 10-20, which meant that they could never catch up.” At one point, company executives allegedly discussed what to do with “31 football fields worth of trailers sitting on parking lots with unloaded inventory.”
One employee is quoted as calling the situation “a ‘house of cards’ that would ‘crumble’ because the company would not stop buying product, but also would not build the resources needed to handle it properly.” Products were not accurately inventoried, seasonal items sat in storage as the season came and went, and much of it ended up in dumpsters.
And the rest of it, the lawsuit states, ended up shipped to unsuspecting stores.
Dollar General “would over-order merchandise and, since there was no room in the distribution center warehouses, the company would force-send the product to stores,” the plaintiff alleges. A former store manager said she pleaded with the warehouses – “For the love of God, please stop sending this” – but “excess product would still arrive the next week.”
Another former store employee described how “stores already backed up with excess inventory would often receive truckloads of new, unneeded inventory from distribution centers,” saying “there’s no dial to turn it down.”
And apparently no employees to deal with it all. “There were not enough staff hours to get the shelves stocked and inventory rotated,” a former employee said, resulting in “massive stockpiles of inventory lining the corridors at stores – to the extent that it blocked fire exits, impeded access to safety equipment, and otherwise created dangerously unsafe work conditions.”
“You go into any major city Dollar General and half of them are disasters,” another former employee is quoted as saying. “A good inspector would shut them down for cleanliness.”
All of this, the lawsuit states, contributes to the problems with pricing that Dollar General has had. The retailer has faced countless lawsuits and investigations into prices that ring up higher at the register than those displayed at the shelf. With “understaffed stores, high turnover and reduced hours for Dollar General employees,” the lawsuit says pricing errors became widespread.
Ultimately, the plaintiff argues, Dollar General executives knew about these problems, painted a rosy picture to investors, and misled them into thinking their investment was worth more than it really was.
The lawsuit accuses company executives of mismanagement, breach of fiduciary duties, and waste of corporate assets. It’s seeking an unspecified amount of damages, costs and fees, and a demand that Dollar General “take all necessary actions to reform and improve its corporate governance and internal procedures.”
Just a few weeks ago, Dollar General’s Chief Financial Officer praised the company’s progress, telling investors that “the team continues to do a tremendous job reducing inventory while increasing sales and improving in-stock levels, which is having positive operational impacts in both stores and distribution centers.”
And then she left the company to go work for Nordstrom.
Her former colleagues will now have to pick up the mantle of defending their company’s inventory management systems. And while this case and others like it make their way through the courts, when it comes to whether Dollar General is making improvements – investors, employees and shoppers may be the ultimate judges.
Image source: Phillip Pessar 
The Dollar’s General store I shop at in Brownville, Brooklyn always have overstock in the back of the store. The also don’t put all the sale items on the shelves. When I go there I see the same shelves empty and the same items that remains on the selves. For example, there’s always a few boxes of Toothpaste on the shelves, the airwick packs of air freshener in the shelves are limited and the selve never organized. The sodas are not being loaded onto the shelves once the sodas are sold out. If there were every put out. Also, different sizes of storage bins never on the shelves. They have the same bins on display for the pass 4 months. They can do much better. I see this nonsense in both stores in Brownville, Brooklyn D& G stores. Theses stores also don’t accept cut out coupons from the the circular.
It was told to me by a cashier that the manufactured coupon barcodes don’t corresponds to the barcode on the items. She continues to say how the store never accepted the manufactured coupons. The store manager said the same thing. This store Dollar’s General doesn’t accept manufactured coupons. How is that? Don’t Dollar’s General gives us manufactured coupons on the apps to use in the store? Well how about that! I reported this to the corporate mange. They took down my complaint. Someone was to call me back to discuss the matter. There were no call back from the company. I called back to check on the status. Another worker put in a complaint on the how unprofessional the assistant manager was to me and she didn’t comply back to me and sent it over to the head boss. The head boss didn’t reach out to me as well. I’m not surprised. Dollar’s General company failed me again. I hope these problems resolve soon as possible.