Jeff Owen
Chief Operating Officer at Dollar General
Thank you, John. Let me take a moment to express my appreciation for all Todd has done for this company throughout his 14-year career. He has led us through a transformational period and has positioned us extremely well for the future. On behalf of the entire Dollar General team, we want to sincerely thank him for the impact he has made on our business. I am fortunate to have been able to learn from him, and I look forward to his ongoing counsel. And as Todd noted, we are excited to announce that John has been promoted to President while continuing to serve as CFO. John has made many significant contributions to Dollar General during his time leading our finance and corporate strategy teams, and I look forward to his continued leadership and partnership as he steps into this new role. Finally, let me also say how humbled and privileged I am by the opportunity to serve this great team as the next CEO of Dollar General. I couldn't be more excited about our future and all that we can accomplish together.
Now, let me take the next few minutes to update you on our operating priorities and strategic initiatives as we continue to create opportunities for meaningful growth. Our first operating priority is driving profitable sales growth. We continue to make progress executing against our robust portfolio of initiatives. Let me take you through some of the recent highlights. Starting with our non-consumables initiative or NCI, which was available in nearly 15,000 stores at the end of the second quarter, we continue to be very pleased with the strong sales and margin performance we are seeing across our NCI store base. This treasure-hunt offering continues to resonate with value-seeking customers as approximately 80% of the assortment is priced at $5 or less. We expect to realize ongoing sales and margin benefits from NCI in 2022 and are on track to complete the rollout across nearly the entire chain by the end of the year.
Moving to our pOpshelf store concept, which further builds on our success and learnings with NCI. As a reminder, pOpshelf aims to engage customers by offering a fun, affordable and differentiated treasure hunt experience delivered through continually refreshed merchandise, a differentiated in-store experience and exceptional value with the vast majority of our items priced at $5 or less. During the quarter, we opened 14 new pOpshelf locations, bringing the total number of stores to 80 located within eight states. Additionally, we opened seven new store-within-a-store concepts during the second quarter. This brings the total number of Dollar General market stores which incorporates a smaller footprint pOpshelf store to a total of 32 at the end of the quarter. We plan to nearly triple the pOpshelf store count this year and now expect to open a total of 15 store-within-a-store concepts which would bring us to about 150 standalone pOpshelf locations and approximately 40 store-within-a-store concepts by year end. Over the long-term, we anticipate year one annualized sales volumes for these stores to be between $1.7 million and $2 million per store and expect the average gross margin rate to exceed 40%. Overall, we continue to be pleased with the results of this unique and differentiated concept, and we are excited about our goal of approximately 1,000 pOpshelf locations by year-end 2025.
Turning now to DG Fresh, which is a strategic multi-phase shift to self-distribution of frozen and refrigerated goods along with a focus on driving continued sales growth in these areas. As a reminder, we completed the initial rollout of DG Fresh across the entire chain in 2021 and are now delivering to nearly 19,000 stores from 12 facilities. The initial objective of DG Fresh was to reduce product costs on our frozen and refrigerated items, and we continue to be very pleased with the savings we are seeing. Another important goal of DG Fresh is to increase sales in frozen and refrigerated categories. We are also pleased with the performance on this front, including enhanced product offerings in stores and strong performance from our perishables department which had our strongest rate of comp sales growth during the first half of the year.
Looking ahead, we expect to realize additional benefits from DG Fresh as we continue to optimize our network, further leverage our scale, deliver an even wider product selection and build on our multiyear track record of growth in cooler doors and associated sales. And while produce was not included in our initial rollout, we continue to believe that DG Fresh provides a potential path forward to expanding our produce offering to more than 10,000 stores over time. Notably, at the end of Q2, we offered produce in more than 2,700 stores with plans to expand this offering to a total of more than 3,000 stores by the end of 2022. Finally, as I previously mentioned, DG Fresh has also extended the reach of our cooler expansion program. During Q2, we added over 17,000 cooler doors across our store base, and we are on track to install more than 65,000 cooler doors in 2022. Importantly, despite the meaningful improvements we have made to date as a result of DG Fresh, we believe we still have significant opportunity to drive additional returns with this initiative in the years ahead.
Turning now to an update on our health initiative branded as DG Wellbeing. The initial focus of this project is an expanded health offering, which consists of approximately 30% more feet of selling space and up to 400 additional items as compared to our standard offering. This offering was available in approximately 2,700 stores at the end of Q2, and we are on track to expand to a total of more than 4,000 stores by the end of 2022. During the quarter, we announced the establishment of a new healthcare advisory panel, which recently convened its first quarterly meeting. The panel is composed of highly regarded healthcare industry subject matter experts who will serve as stock partners to our team including advising on how best to invest resources to better serve our customers in the health and wellness space. Looking ahead, our plans include further expansion of our health offering with the goal of increasing access to basic healthcare products and ultimately services over time, particularly in rural America.
In addition to the gross margin benefits associated with the initiatives I just discussed, we continue to pursue other opportunities to enhance gross margin including improvements in private brand sales, global sourcing, supply chain efficiencies and shrink reduction. To that end, we recently announced plans to significantly increase our supply chain capacity by building three new distribution centers in North Little Rock, Arkansas; Aurora, Colorado and Salem, Oregon. Each facility will be approximately one million square feet and supported in part by our growing private fleet. We expect to begin construction on the Arkansas and Oregon facilities this fall, both of which will be combo traditional and fresh distribution centers. We have already begun construction on the Colorado facility, which will be a traditional dry goods distribution center. We are excited about these new projects, which we expect will add more than 1,000 new jobs, supporting our ongoing store growth and drive additional efficiencies in our supply chain.
Our second priority is capturing growth opportunities. Our proven high-return, low-risk real estate model has served us well for many years and continues to be a core strength of our business. In the second quarter, we completed a total of 790 real estate projects including 227 new stores, 533 remodels and 30 relocations. For 2022, we are updating our real estate plans to reflect adjustments made primarily in response to ongoing delays related to permitting and the receipt of construction materials associated with the new store openings. For 2022, we now plan to execute in the range of 2930 to 2980 real estate projects in total including 1,010 to 1,160 new stores, approximately 1,795 remodels and about 125 store relocations. We continue to expect approximately 80% of our new Dollar General stores in 2022 to be in our larger 8,500 square foot store format, which allows us for an even greater assortment as we look to serve our customers with products they want and need. Importantly, we continue to be very pleased with the unit economics of this larger format, highlighted by increased sales productivity and we continue to target returns in the range of 20% to 22%.
In addition to our planned Dollar General and pOpshelf growth in 2022, we are very excited about our plans to expand internationally, and we continue to make good progress towards our goal of opening our first stores in Mexico by the end of 2022. I am pleased to announce that these stores will be branded under the name Super Dollar General which resonated well with customer focus groups and connotes the idea of a local general store focused on serving customers with products they want and need most.
In addition, the initial stores will be located in underserved communities in Northern Mexico as we look to initially leverage our brand awareness while extending our value and convenience proposition to a customer base that is similar to our core customer in the United States. Overall, our real estate pipeline remains robust and with more US brick-and-mortar stores than any retailer, we are excited about our ability to capture significant growth opportunities in the years ahead.
Next, our digital initiative, which is an important complement to our physical footprint as we continue to deploy and leverage technology to further enhance convenience and access for customers. Our efforts remain centered around creating a digital front porch to our stores as we look to create deeper and more meaningful connections with our customers. We ended Q2 with nearly 4.5 million monthly active users on the digital app and expect this number to grow as we look to further enhance our digital offerings. Our partnership with DoorDash continues to resonate with both new and existing customers as we look to extend the value offering of Dollar General combined with the convenience of same-day delivery in an hour or less. This offering was available in more than 13,300 stores at the end of Q2, and we continue to be very pleased with the results including sales above our initial expectations for the first half of the year.
In addition, we are also excited about the continued growth of our DG Media Network. We are seeing significant interest in participation from CPG companies and brands who are seeking to connect with the more than 80 million unique customer profiles, especially our rural customers, who represent about 30% of the country and elude the reach of other retail media networks. As a result, we are enabling advertisers to both digitally and physically build awareness and drive purchase consideration while positioning Dollar General as a retailer of choice for customers seeking many of America's most trusted brands.
After establishing the foundation over the last few years, we are beginning to meaningfully grow this business as we expand the program and enhance the value proposition for both our customers and brand partners while increasing the overall net financial benefit for the business. Overall, our strategy consists of building a digital ecosystem specifically tailored to provide our customers with an even more convenient, frictionless and personalized shopping experience. And we are pleased with the growing engagement we are seeing across our digital properties. Our third operating priority is to leverage and reinforce our position as a low-cost operator. We have a clear and defined process to control spending, which continues to govern our disciplined approach to spending decisions. This zero-based budgeting approach internally branded as Save to Serve keeps the customer at the center of all we do while reinforcing our cost control mindset.
Our Fast Track initiative is a great example of this approach where our current goals include increasing labor productivity in our stores and enhancing customer convenience. The first phase of Fast Track consisted of both rolltainer and case pack optimization, which has led to the more efficient stocking of our stores. The second component of Fast Track is self checkout which provides customers with another flexible and convenient checkout solution while also driving greater efficiencies for our store associates. Self-checkout was available in approximately 10,000 stores at the end of Q2, and we continue to be pleased with our results, including strong customer adoption rates.
We are also excited about our pilot in select stores which provides customers the option to utilize self-checkout in all lanes but also choose a staffed register preferred. We believe this full self-checkout option could further enhance our convenience proposition while enabling store teams to dedicate even more time to serving customers. We plan to ultimately test this layout in about 200 stores by the end of this year. Looking ahead, we are on track to expand our self-checkout offering to a total of up to 11,000 stores by the end of the year as we look to further extend our position as an innovative retail in small-box discount retail.
Moving forward, the next phase of Fast Track consists of increasing our utilization of emerging technology and data strategies which includes putting new digital tools in the hands of our field leaders. When combined with our data-driven inventory management, we believe these efforts will drive greater efficiencies for our retail leaders and their teams. Our efforts to reduce costs have also benefited from our growing private fleet which consisted of more than 1,100 tractors at the end of Q2. As a reminder, we are focused on significantly expanding our private fleet in 2022 as we plan to more than double the number of tractors from 2021 which we expect will account for approximately 40% of our outbound transportation fleet by the end of the year. Our underlying principles are to keep the business simple but move quickly to capture growth opportunities while controlling expenses and always seeking to be a low-cost operator.
Our fourth operating priority is investing in our diverse teams through development, empowerment and inclusion. As a growing retailer, we continue to create new jobs and opportunities for personal and professional development and ultimately career advancement. To that end, we are very pleased with our DG discover hiring event in Q2, which exceeded our goal for new hires while adding significant talent to our teams in the field, distribution centers and private fleet.
With regards to development, our internal promotion pipeline remains robust as evidenced by internal placement rates of more than 75% at or above the lead sales associate position. Additionally, approximately 15% of our private fleet began their careers with us in either a store or distribution center. We also continue to be pleased with our turnover rates, staffing levels and applicant flow, further validating our belief that we are taking the right actions to attract and retain talent. Ultimately, we believe the opportunity to start and develop a career with a growing and purpose-driven company is a unique competitive advantage and remains our greatest currency in attracting and retaining talent. We also held our annual leadership meeting earlier this month in Nashville, providing an important collaboration and development experience for more than 1,500 leaders of our company. This event is a high point for me every year, and I am always inspired by the incredible talent of our people and humbled by the way they live out their personal purpose while fulfilling our mission to serve others.
In closing, I am proud of the team's strong performance as we continue to make great progress against our operating priorities and strategic initiatives while creating meaningful value for our shareholders. I want to thank our approximately 173,000 employees for their work every day to make a difference in the lives of our customers, especially at times like this when they need us the most. I am excited about all that we will accomplish together in the second half of 2022 and beyond.
With that, operator, we would now like to open the lines for questions.
