GOODLETTSVILLE, Tenn. — Higher prices attracted more belt-tightening shoppers to its stores and helped Dollar General Corp. post quarterly sales and profits that topped Wall Street’s estimates for the discount retailer’s second quarter.
Dollar General said net sales rose 9% to $9.4 billion in the quarter ended July 29, pushing net income to $678 million, up 6% from a year earlier. Comparable sales from stores and digital channels increased 4.6%, with shoppers spending more on food but less on apparel, seasonal items and home goods.
Dollar General raised its sales expectations for the year and maintained its profit outlook. It now expects comparable sales to rise 4% to 4.5%, up from a previous estimate of 3% to 3.5%.
“I have never felt better about the underlying business model or our future growth potential,” chief executive officer Todd Vasos said on an earnings call, citing Dollar General’s competitive strengths and a robust portfolio of short- and long-term initiatives. “We’re here to help that customer through probably the toughest time she’s seen in quite a while.”
Vasos is preparing to step down as CEO. He will be succeeded by Jeff Owen, the company’s chief operating officer, on November 1. As part of the transition, John Garratt, the company’s chief financial officer, has been given the added role of president.
Vasos said company executives feel very good about the retailer’s price position relative to competitors. “And with more than 18,500 stores located within five miles of about 75% of the U.S. population, we believe we are well positioned to navigate the current environment while continuing to support our customers through our unique combination of value and convenience,” he said.
Company executives remain confident that Dollar General has plenty of opportunity to grow through new stores, including those under its pOpshelf banner, which enables the retailer to go after shoppers with annual incomes ranging from $50,000 to $125,000 and engage them with a fun, affordable and stress-free shopping experience, delivered through continually refreshed merchandise.
“Collectively, we view our Q2 results as further validation that our strategic actions — which have transformed this company in recent years — position us well for continued success while supporting long-term shareholder value creation,” Vasos told investors. “We continue to operate in one of the most attractive sectors in retail.”
Nonetheless, the company’s near-term forecast is clouded with uncertainties regarding product-cost inflation, supply chain dynamics, evolving consumer behaviors and delays in new store openings, Garratt said on the earnings call.
“Despite these challenges, we are confident in the business,” said Garratt. “For the full year, we now expect net sales growth of approximately 11%, including an estimated benefit of approximately 2 percentage points from the 53rd week and same-store sales growth of approximately 4% to 4.5%. Additionally, we are reiterating the remainder of our financial guidance for 2022, which includes EPS growth of approximately 12% to 14%, including an estimated benefit of approximately 4 percentage points from the 53rd week, share repurchases of approximately $2.75 billion and capital spending in the range of $1.4 billion to $1.5 billion.”
Garratt said he expects Dollar General to continue realizing benefits from initiatives including DG Fresh (in-house distribution of a refrigerated goods, allowing stores to keep cooler doors stocked with food) and NCI (new and expanded assortments of nonconsumables).
“In addition,” Garratt said, “we’re optimistic that distribution and transportation efficiencies, including expansion of our private fleet, will drive additional benefits despite continued cost pressures.”