Equities

Dollar General Settles Safety Case, Pays $12M, Stock Down 20%

Dollar General to pay $12 million in penalties, hire safety staff, and face $100,000 daily fines for unresolved issues.

By Jack Wilson

7/11, 14:51 EDT
Dollar General Corporation
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Key Takeaway

  • Dollar General settles with US safety regulators, agreeing to pay $12 million in penalties and implement new safety protocols.
  • The settlement aims to address investor concerns over safety issues, which have contributed to a 20% decline in Dollar General's stock over the past year.
  • Leadership changes include the return of former CEO Todd Vasos, focusing on improving staffing and slowing expansion efforts.

Settlement Agreement

Dollar General Corp. has reached a comprehensive settlement with US safety regulators, marking a significant development for the retailer following years of scrutiny over safety conditions in its stores. The company will pay $12 million in penalties and has committed to implementing new safety protocols, hiring additional safety staff, and reducing store inventory to prevent obstructed exits, according to the US Department of Labor. The agreement also includes the involvement of external experts to identify hazards and conduct surprise audits. If issues are not resolved within 48 hours, Dollar General could face fines of $100,000 per day, up to a maximum of $500,000.

Acting US Labor Secretary Julie Su commented on the settlement, stating that it should "end this practice of constantly finding violations, fining them, and then seeing the violations repeat." She emphasized the strength of the agreement, noting that it demonstrates how government intervention can "change corporate behavior from the top down."

Investor Concerns

The settlement addresses a significant concern for investors, who have been wary of the company's handling of safety issues and the potential impact on its reputation. Over the past 12 months, shares of Dollar General have declined by more than 20%, in contrast to a 7% gain in the S&P 500 Consumer Staples Index. The resolution of these safety issues could help alleviate some of the investor concerns that have weighed on the stock.

Dollar General has approximately 20,000 locations across the US, making it the most widespread retailer in the country. However, conditions at these stores have often been described as dirty, miserable, and dangerous, according to former employees and federal records. Since 2017, the company has failed hundreds of government safety inspections, accumulating over $25 million in proposed fines for violations such as risks of falling objects, electrocution, and fire hazards.

Leadership Changes

In October, Dollar General announced a leadership change, replacing its CEO less than a year into the job. Todd Vasos, who previously served as CEO from 2015 to 2022, returned to the role with a commitment to improving staffing levels at the front of stores and slowing down the company's expansion efforts. This move was aimed at restoring stability and confidence in the company. Employees have long cited systemic understaffing and poor maintenance as contributing factors to the safety hazards.

Current and former employees have been advocating for changes at Dollar General for several years, working with unions and other advocacy groups. Last year, shareholders approved a resolution urging an independent safety audit, reflecting growing concern over the company's safety practices.

Management Quotes

  • Julie Su, Acting US Labor Secretary:

    "The settlement is very strong and shows how government can change corporate behavior from the top down."
    "That drives me crazy." (Referring to the practice of constantly finding violations, fining them, and then seeing the violations repeat.)

  • Todd Vasos, CEO of Dollar General:

    "A change was needed to restore stability and confidence in the company moving forward."