• Net profit rose 15% to $245m 
  • Sales increased 11.3% to $4.39bn 
  • Same store sales rose 5.1%

US discounter Dollar General posted a "solid" performance during its second quarter, with both net profit and sales growing on the back of increased traffic in its stores.

"Dollar General delivered another solid quarter," said chairman and CEO Rick Dreiling.

The company today (4 September) said net income reached US$245m during the 13 weeks to 2 August, up from $214m in the same period of last year.

Sales increased 11.3% to $4.39bn from $3.95bn the prior year, while same-store sales grew 5.1%. Sales of consumables continued to increase at a higher rate than non-consumables, with strong sales of perishables and candy and snacks.

"We are very pleased with the increase in customer traffic in our stores. We continue to grow our market share and believe that our second quarter results position us well to deliver our financial outlook for the year," Dreiling noted.

During the first half of the year, net income increased 8.9% to $465.6m from $427.6m last year. Sales reached $8.63bn, up from $7.85bn in the prior year.

"We remain focused on driving our sales and profitability, capturing high-return growth opportunities, returning cash to our shareholders through share repurchases and creating long-term value," Dreiling added.

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Dollar General Corporation Reports Record Second Quarter 2013 Financial Results

 

 

  • Second Quarter Same-Store Sales Increased 5.1%; Total Sales Increased 11.3%
  • Second Quarter EPS of $0.75; Adjusted EPS of $0.77
  • Company Confirms 2013 Earnings Guidance

GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)-- Dollar General Corporation (NYSE: DG) today reported record sales, operating profit and net income for its fiscal 2013 second quarter (13 weeks) ended August 2, 2013.

"Dollar General delivered another solid quarter. Our same-store sales growth for the second quarter of 2013 accelerated to 5.1 percent. We are very pleased with the increase in customer traffic in our stores. We continue to grow our market share and believe that our second quarter results position us well to deliver our financial outlook for the year," said Rick Dreiling, Dollar General's chairman and chief executive officer.

"We remain focused on driving our sales and profitability, capturing high-return growth opportunities, returning cash to our shareholders through share repurchases and creating long-term value," Mr. Dreiling continued.

Second Quarter Highlights

The Company's net income increased by 15 percent to $245 million in the 2013 second quarter, compared to net income of $214 million in the 2012 second quarter, and earnings per diluted share ("EPS") of $0.75 in the 2013 second quarter increased 17 percent over EPS of $0.64 in the 2012 quarter. Adjusted net income, as defined under "Non-GAAP Disclosures" below, was $251 million, or $0.77 per diluted share, in the 2013 second quarter compared to $231 million, or $0.69 per diluted share, in the 2012 second quarter. Reported and adjusted net income in the 2012 second quarter included a benefit of $14.5 million, or approximately $0.04 per diluted share, relating to an adjustment of accruals resulting from the favorable resolution of income tax audits.

Net sales increased 11.3 percent to $4.39 billion in the 2013 second quarter compared to $3.95 billion in the 2012 second quarter. Same-store sales increased 5.1 percent, with increases in both customer traffic and average transaction value. Consumables sales continued to increase at a higher rate than non-consumables in the 2013 quarter, with the most significant growth related to the Company's newly introduced tobacco products and strong sales of perishables and candy and snacks. Same-store sales growth was solid in seasonal and apparel, and the trend in home products improved from the 2013 first quarter results.

Gross profit increased by 9 percent and, as a percentage of sales, decreased by 65 basis points to 31.3 percent in the 2013 second quarter. The majority of the gross profit rate decrease in the second quarter of 2013 as compared to the second quarter of 2012 was due to an increase in the mix of consumables and increased sales of lower margin consumables, including the Company's newly introduced tobacco products and expanded perishables offerings, all of which contributed to lower initial inventory markups. In addition, the Company's inventory shrinkage rate increased. These factors were partially offset by transportation efficiencies and lower markdowns, primarily due to the timing of apparel markdowns. The Company recorded a LIFO benefit of $2.4 million in the 2013 quarter compared to a LIFO benefit of $0.5 million in the 2012 quarter.

Selling, general and administrative expenses ("SG&A") were 21.9 percent of sales in the 2013 quarter compared to 22.2 percent in the 2012 quarter, an improvement of 23 basis points. Excluding a legal settlement of $8.5 million in the 2013 second quarter, SG&A was 21.8 percent of sales, an improvement of 41 basis points from SG&A, excluding secondary offering-related expenses, in the 2012 second quarter. Retail labor expense and utilities costs increased at a rate lower than the increase in sales. In addition, decreases in incentive compensation, workers' compensation and general liability expenses 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 repairs and maintenance, fees associated with the increased use of debit cards, and depreciation and amortization.

Interest expense was $21 million in the 2013 second quarter, a decrease of $15 million from the 2012 second quarter, due to lower average interest rates, primarily resulting from refinancing efforts over the past year.

The effective income tax rate was 37.4 percent in the 2013 second quarter compared to a rate of 34.1 percent in the 2012 quarter. Income tax expense in the 2012 quarter was reduced by $14.5 million (or approximately $0.04 per diluted share) associated with the adjustment of accruals due to the favorable resolution of income tax examinations. The 2013 period was favorably impacted by income tax benefits associated with federal jobs credits. The federal law authorizing these credits was not in effect during the 2012 second quarter but was retroactively re-enacted later in 2012.

26-Week Period Results

For the 26-week period ended August 2, 2013, net sales increased 9.9 percent over the comparable 2012 period, to $8.63 billion. Same-store sales increased 3.8 percent.

Gross profit increased by 7 percent and, as a percentage of sales, decreased by 77 basis points to 31.0 percent in the 2013 26-week period. The majority of the gross profit rate decrease in the 2013 period as compared to the 2012 period was due to an increase in the mix of consumables and increased sales of lower margin consumables, including the Company's newly introduced tobacco products and expanded perishables offerings, all of which contributed to lower initial inventory markups. In addition, the Company's inventory shrinkage rate increased. These factors were partially offset by transportation efficiencies. The Company recorded a LIFO benefit of $2.8 million in the 2013 period compared to a LIFO provision of $1.1 million in the 2012 period.

Selling, general and administrative expenses were 21.6 percent of sales in the 2013 26-week period compared to 21.9 percent in the 2012 period, an improvement of 30 basis points. Excluding a legal settlement of $8.5 million and expenses relating to a secondary offering of the Company's common stock, SG&A was 21.5 percent of sales in the 2013 period, a 39 basis point improvement from SG&A, excluding expenses relating to secondary offerings, in the 2012 period. Retail labor expense increased at a rate lower than the increase in sales for the period. In addition, decreases in incentive compensation, workers' compensation and general liability expenses 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 fees related to increased use of debit cards, repairs and maintenance costs and depreciation and amortization.

Interest expense was $45 million in the 2013 26-week period, a decrease of $28 million from the 2012 period, due to lower average interest rates, primarily resulting from refinancing efforts over the past year.

Other (income) expenses in the 2013 26-week period included pretax losses 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 losses totaling $29.0 million resulting from the Company's redemption of its senior subordinated notes, a $2.5 million pretax gain resulting from the settlement of interest rate swaps, and a pretax loss of $1.6 million resulting from the amendment of the senior secured revolving credit facility.

The effective income tax rate for the 2013 26-week period was 37.4 percent compared to a rate of 36.2 percent for the 2012 period. Income tax expense in the 2012 period was reduced by $14.5 million (or approximately $0.04 per diluted share) associated with the adjustment of accruals due to the favorable resolution of income tax examinations. The 2013 period was favorably impacted by income tax benefits associated with federal jobs credits. The federal law authorizing these credits was not in effect during the 2012 period, but was retroactively re-enacted later in 2012.

For the 26-week 2013 period, the Company reported net income of $466 million, or $1.42 per diluted share, compared to net income of $428 million, or $1.27per diluted share, for the 2012 26-week period. Excluding adjustments as described in the accompanying reconciliation, adjusted net income for the 2013 26-week period was $483 million, or $1.48 per diluted share, compared to adjusted net income in the 2012 period of $446 million, or $1.32 per diluted share. Reported and adjusted net income in the 2012 period included a benefit of $14.5 million, or approximately $0.04 per diluted share, relating to an adjustment of accruals resulting from the favorable resolution of income tax audits.

Merchandise Inventories

As of August 2, 2013, total merchandise inventories, at cost, were $2.53 billion compared to $2.15 billion as of August 3, 2012, an increase of 11 percent on a per-store basis. Inventory turns for the 52 weeks ended August 2, 2013 were 4.9 times.

Capital Expenditures

Total additions to property and equipment in the 26-week 2013 period were $309 million, including: $127 million for improvements, upgrades, remodels and relocations of existing stores; $66 million related to new leased stores, primarily for leasehold improvements, fixtures and equipment; $52 million for stores purchased or built by the Company; $49 million for distribution and transportation-related capital expenditures; and $12 million for information systems upgrades and technology-related projects. During the 26-week period, the Company opened 375 new stores and remodeled or relocated 377 stores.

Share Repurchases

In the 2013 second quarter, the Company repurchased 3.9 million shares of its outstanding common stock for $200 million, increasing total purchases under its share repurchase program to $220 million, or 4.3 million shares, in the 2013 26-week period. Since the inception of the program in December 2011, the Company has repurchased 23.6 million shares totaling $1.1 billion. Authorizations for an additional $424 million of share repurchases remain available under the Company's share repurchase program.

Fiscal 2013 Financial Outlook

For the 2013 fiscal year, the Company expects total sales to increase 10 to 11 percent over the 2012 fiscal year. Same-store sales are expected to increase 4 to 5 percent. The Company's 2013 full year gross profit, as a percentage of sales, is expected to decrease from the full year 2012 gross profit rate by approximately 90 basis points. Operating profit, excluding certain items, for 2013 is expected to be in the range of $1.73 billion to $1.77 billion. The Company expects full year interest expense to be approximately $95 million.

EPS for the fiscal year, adjusted to exclude the $8.5 million legal settlement in the second quarter and charges or expenses relating to amendments to or refinancing of any notes, loans or revolving credit facilities and expenses resulting from secondary stock offerings, is expected to be approximately $3.15 to$3.22. This estimate is based on approximately 324 million weighted average diluted shares outstanding. The full year 2013 effective tax rate is expected to be in the range of 37.5 to 38 percent.

Capital expenditures are expected to be in the range of $575 million to $625 million in 2013. Approximately 50 percent of planned capital spending is for investment in store growth and development, including new stores, remodels, relocations and purchases of existing store locations; approximately 30 percent is planned for transportation, distribution and special projects; and the remaining 20 percent is expected to be spent on maintenance capital. The Company plans to open approximately 650 new stores, an increase from the previous estimate of 635 new stores. In addition, the Company plans to remodel or relocate a total of approximately 550 stores. Square footage is again expected to increase by approximately 7 percent. The Company expects its new Pennsylvaniadistribution center to be fully operational in the first quarter of fiscal 2014.

The Company plans to utilize a portion of its cash flows in 2013 to repurchase common stock under its share repurchase program.

Original source: Dollar General