US: Dollar General FY sales, earnings up
Consumable sales drive Dollar General gains
Dollar General has booked an increase in sales and earnings for the fiscal year to the en of January.
The US retailer said sales grew to US$17.5bn in the 12 months, up from $16bn in the prior year.
Same-store sales were up 3.3% thanks to increased footfall and higher basket sizes. Dollar General attributed the rise in transaction value to the "refinement" of merchandising, including the expansion of perishables. Higher candy and snacks sales also contributed, the dollar retailer added.
Operating profit increased 4.9% on the year to $1.7bn, with SG&A costs accounting for a slightly higher proportion of sales in 2013. Operating profit was up 7.6% to $1.05bn.
For the coming year, Dollar General predicted sales to rise by 8-9% on like-for-like growth of 3-4%. Adjusted operating profit is expected to rise 2-5%.
Dollar General Reports Record Fourth Quarter and Full Year 2013 Financial Results
- Full Year Sales Increased 9.2%; Full Year Same-Store Sales Increased 3.3%
- Fourth Quarter Sales Increased 6.8%; Fourth Quarter Same-Store Sales Increased 1.3%
- Fiscal 2013 EPS of $3.17; Adjusted Fiscal 2013 EPS Increased 10% to $3.20
- Fourth Quarter EPS Increased to $1.01
- Company Provides 2014 Financial Guidance
GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)-- Dollar General Corporation (NYSE: DG) today reported record sales, operating profit and net income for its fiscal 2013 fourth quarter (13 weeks) and full year (52 weeks) ended January 31, 2014.
"I am pleased to report Dollar General's twenty-fourth consecutive year of same-store sales growth in 2013," said Rick Dreiling, chairman and CEO. "Among our other many accomplishments for the year, we successfully opened 650 new stores, ending the year with 11,132 stores serving customers in 40 states. We made great progress in managing our investment in inventories in 2013, and importantly, we generated significant cash flow from operations and returned $620 million to shareholders through share repurchases.
"Sales in the fourth quarter were impacted by severe winter weather, including many days with significant store closures, an aggressive competitive retail landscape and our customers' uncertainty about spending in the current economic environment. In spite of these headwinds, both customer traffic and average ticket increased in our same-stores in the fourth quarter. In addition, we controlled our expenses well and successfully managed the business to deliver a gross margin rate that was better than we anticipated. Although some of the severe weather impact has continued into the first quarter, we are pleased with our sales performance on days when weather is more normalized."
"Dollar General is a strong and growing business with high return store growth opportunities that we intend to capture," Mr. Dreiling continued. "While we remain cautious on the current operating environment and the many challenges our customer is facing in 2014, we have a business model that generates significant cash flow, putting us in a position to invest in these growth opportunities, while continuing to return cash to shareholders through share repurchases."
Fiscal Fourth Quarter 2013 Highlights
The Company's net income for the 2013 fourth quarter was $322 million, or diluted earnings per share ("EPS") of $1.01, compared to net income of$317 million, or diluted EPS of $0.97, in the fourth quarter of fiscal 2012.
Net sales increased 6.8 percent to $4.49 billion in the 2013 fourth quarter compared to $4.21 billion in the 2012 fourth quarter. Same-store sales increased 1.3 percent, resulting from increases in both customer traffic and average transaction amount. Same-store sales increases were driven by sales of tobacco products and perishables.
The Company's gross profit, as a percentage of sales, was 31.9 percent in the 2013 fourth quarter compared to 32.5 percent in the 2012 fourth quarter, a decrease of 58 basis points. The majority of the gross profit rate decrease in the 2013 fourth quarter as compared to the 2012 fourth quarter was due to increased sales of lower margin consumables, including tobacco products and expanded perishables offerings, which contributed to lower initial markups. In addition, the Company's inventory shrinkage rate increased. These factors were partially offset by a reduction in net purchase costs on certain products. The Company recorded a LIFO benefit of approximately $4.5 million compared to a LIFO provision of $0.2 million in the 2012 fourth quarter.
Selling, general and administrative expenses ("SG&A") were $897 million, or 20.0 percent of sales, in the 2013 fourth quarter, compared to $845 million, or 20.1 percent of sales, in the 2012 fourth quarter, an improvement of 14 basis points. The Company's annual financial performance did not satisfy certain requirements under the Company's annual cash incentive compensation program, resulting in a decrease in related fourth quarter expense of 45 basis points. In addition, decreases in health benefits costs and workers' compensation and general liability expenses contributed to the net improvement in SG&A as a percentage of sales. In general, as the result of lower than planned sales, most other operating expenses increased at a rate higher than the increase in sales.
Interest expense was $22 million in the 2013 fourth quarter, a decrease of $5 million from the 2012 fourth quarter, due to lower average interest rates, primarily resulting from the completion of the Company's refinancing in April 2013.
The effective income tax rate in the 2013 fourth quarter was 37.5 percent compared to 35.9 percent in the 2012 fourth quarter. The 2012 fourth quarter benefited by approximately $6.5 million, or $0.02 per share, from the retroactive (for employees hired on or after January 1, 2012) reenactment of the Work Opportunity Tax Credit ("WOTC").
Full Year 2013 Financial Results
Full year 2013 net sales increased 9.2 percent to $17.5 billion compared to net sales of $16.0 billion in 2012. Same-store sales increased 3.3 percent, including increases in both customer traffic and average transaction amount, resulting from the refinement of the Company's merchandise offerings, including the addition of tobacco products, the expansion of perishables, and increased utilization of store square footage. The increase in sales of consumables outpaced the increase in sales of non-consumables, with sales of tobacco, perishables and candy and snacks contributing the majority of the increase throughout the year.
The Company's gross profit rate was 31.1 percent of sales in 2013 compared to 31.7 percent in 2012, a decrease of 69 basis points. The majority of the gross profit rate decrease in 2013 as compared to 2012 was due to increased sales of lower margin consumables, including tobacco products and expanded perishables offerings, which contributed to lower initial inventory markups. In addition, the Company's inventory shrinkage rate increased. These factors were partially offset by a reduction in net purchase costs on certain products. The Company recorded a LIFO benefit of $11.0 million in 2013 compared to a LIFO provision of $1.4 million in 2012.
Full year SG&A was 21.1 percent of sales in 2013 compared to 21.4 percent in 2012, an improvement of 27 basis points. Excluding a legal settlement of $8.5 million in 2013 and expenses relating to secondary offerings of the Company's common stock in both years, SG&A as a percentage of sales improved by 31 basis points from 2012. For the full year, decreased incentive compensation, as described above, reduced SG&A as a percentage of sales by 19 basis points from 2012. In addition, retail labor expense increased at a rate lower than the increase in sales and workers' compensation and general liability expenses decreased, all of which contributed to the overall improvement in SG&A as a percentage of sales. Costs that increased at a higher rate than the increase in sales include depreciation and amortization and fees related to the increased use of debit cards.
Interest expense in 2013 was $89 million, a decrease of $39 million from 2012, due to lower average interest rates primarily resulting from the completion of the Company's refinancing in April 2013.
Other (income) expense in 2013 includes pre-tax costs of $18.9 million resulting from the restructuring of the Company's credit facilities in the 2013 first quarter. Other (income) expense in the 2012 period included pretax costs totaling $29.0 million resulting from the Company's redemption of its senior subordinated notes.
The effective income tax rate for 2013 was 37.0 percent compared to 36.4 percent for 2012. The 2012 rate was favorably impacted by an adjustment of$14.5 million, or $0.04 per diluted share, associated with an adjustment of accruals due to the favorable resolution of income tax audits, which was recorded in the fiscal 2012 second quarter, that did not reoccur to the same extent in 2013. The rate increase was partially offset by the recording of an income tax benefit in 2013 associated with the expiration of the period during which the taxing authorities could have assessed additional income tax associated with the Company's 2009 tax year. In addition, 2013 reflects larger income tax benefits associated with federal jobs credits, principally the WOTC.
The Company reported net income of $1.025 billion, or diluted EPS of $3.17, for fiscal year 2013 compared to net income of $953 million, or diluted EPS of $2.85, for fiscal year 2012. Adjusted net income, as defined under "Non-GAAP Disclosure" below, and as reconciled to net income in the accompanying schedules, increased 6.5 percent to $1.037 billion in fiscal 2013 compared to adjusted net income of $973 million in fiscal 2012. Adjusted EPS increased 10.0 percent to $3.20 in fiscal 2013 compared adjusted EPS of $2.91 in fiscal 2012.
As of January 31, 2014, total merchandise inventories, at cost, were $2.55 billion compared to $2.40 billion as of February 1, 2013, an increase of 6.5 percent in total and less than one percent on a per-store basis.
Significant components of property and equipment purchases in 2013 included the following approximate amounts: $187 million for improvements, upgrades, remodels and relocations of existing stores; $124 million for new leased stores; $112 million for distribution centers; $76 million for stores purchased or built by the Company; and $28 million for information systems upgrades and technology-related projects. During 2013, the Company opened 650 new stores and remodeled or relocated 582 stores.
The Company repurchased $620 million, or 11.0 million shares, under its share repurchase program in 2013 and an additional $200 million, or 3.5 million shares, in the 2014 first quarter to date. Since the inception of the share repurchase program in December 2011, the Company has repurchased 33.8 million shares for a total cost of $1.7 billion. $824 million remains available for share repurchases under the Company's current authorization.
Fiscal 2014 Financial Outlook
For the 2014 fiscal year, the Company expects total sales to increase 8 to 9 percent over the 2013 fiscal year. Same-store sales are expected to increase 3 to 4 percent. Adjusted operating profit for 2014 is expected to increase 2 to 5 percent. The Company expects SG&A as a percentage of sales to increase over 2013 SG&A as a percentage of sales. This guidance includes incremental SG&A of $35 million (or approximately $0.07 per share) relating to anticipated incentive compensation and $10 million to $15 million (or approximately $0.02 to $0.03 per share) of estimated additional costs resulting from the Affordable Care Act. In addition, SG&A in 2014 is expected to include approximately $10 million of additional expense due to the impact of the Company's recent sale leaseback transaction. A portion of the proceeds from the sale leaseback transaction were utilized to repurchase 3.5 million shares of the Company's common stock in the 2014 first quarter, resulting in estimated accretion to EPS of $0.01 to $0.02, net of incremental expense related to the sale leaseback. The impact of the sale leaseback transaction is included in the earnings guidance.
The Company expects full year interest expense to be in the range of $85 million to $90 million and the full year 2014 effective tax rate to be approximately 38 percent.
Diluted EPS for the fiscal year is expected to be approximately $3.45 to $3.55, based on approximately 306 million to 307 million weighted average diluted shares, assuming share repurchases of approximately $1.1 billion.
For the first quarter (13 weeks) ending May 2, 2014, the Company expects total sales to increase 7 to 8 percent and sales in same-stores to increase 2 to 3 percent over the 2013 first quarter. First quarter 2014 EPS is expected to be approximately $0.72 to $0.74.
Capital expenditures are expected to be in the range of $450 million to $500 million in 2014. The Company plans to open approximately 700 new stores in 2014.
The volatility of the macroeconomic environment continues to pressure the consumer and impact the Company's cost of purchasing and delivering merchandise to its stores. Management continues to closely monitor customers' responses to the economic and competitive climates.
Original source: Dollar General
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