Operating profit increased by 80.5% to $1 billion in the quarter, the company said Thursday. Diluted earnings per share (“EPS”) increased by 89.1% to $3.12. And cash flows From operations increased by 157.2% to $2.9 billion
“I want to thank our associates for their exceptional work over the past several months as we continue to navigate this challenging and dynamic operating environment,” Dollar General’s chief executive officer Todd Vasos said in a statement. “As the neighborhood general store for thousands of communities across the country, we appreciate the importance of our role in providing customers with affordable, convenient, and close-to-home access to everyday essentials. As a result of the team’s strong execution and tireless commitment to serving our customers, we are pleased to report strong second-quarter financial results.
“We continue to operate from a position of strength and are excited to announce the acceleration of several key strategic initiatives, including the rollout of DG Pickup, DG Fresh, and our Non-Consumables initiative, as well as an increase in our expected number of real estate projects for fiscal 2020. Our robust portfolio of initiatives, coupled with our expansive real estate footprint of nearly 17,000 store locations, positions us well to continue delivering value and convenience for our customers while driving sustainable long-term growth and value for our shareholders.”
Net sales increased by 24.4% to $8.7 billion in the second quarter of 2020. The increase included positive sales contributions from new stores and growth in same-store sales, modestly offset by the impact of store closures. Same-store sales increased by 18.8% compared to the second quarter of 2019, driven by an increase in average transaction amount, partially offset by a decline in customer traffic. Same-store sales increased in each of the consumables, seasonal, home products and apparel categories, with the largest percentage increase in the home products category.
Dollar General said consumer behavior driven by COVID-19 appeared to have had a significant positive effect on net sales and same-store sales.
Gross profit as a percentage of net sales was 32.5% in the second quarter of 2020 compared to 30.8% in the second quarter of 2019, an increase of 167 basis points. This gross profit rate increase was attributable to higher initial markups on inventory purchases, a greater proportion of sales coming from the non-consumables product categories, which generally have a higher gross profit rate than the consumables product category, and a reduction in markdowns as a percentage of net sales. These factors were partially offset by increased distribution and transportation costs, which were impacted by the COVID-19 pandemic in the form of increased volume and discretionary employee bonus expense. As a result of the significant increase in sales, the Company believes consumer behavior driven by COVID-19 also had a significant positive effect on gross profit dollars.
Selling, general and administrative expenses (“SG&A”) as a percentage of net sales were 20.4% in the second quarter of 2020 compared to 22.5% in the second quarter of 2019, a decrease of 205 basis points. Although the Company incurred certain incremental costs related to COVID-19, they were more than offset by the significant increase in net sales during the quarter as discussed above. Expenses that were lower as a percentage of net sales in the current year period include retail labor, occupancy costs, utilities, employee benefits, depreciation and amortization, and taxes and licenses. These items were partially offset by increased incentive compensation and charitable giving expenses. The second quarter of 2019 included expenses of $31.0 million, or 44 basis points, reflecting the Company’s estimate for the settlement of certain legal matters (the “Significant Legal Expenses”). SG&A in the second quarter of 2020 decreased 161 basis points as a percentage of sales compared to Adjusted SG&A of 22.1%1, which excluded the impact of the Significant Legal Expenses, in the 2019 second quarter.
The Company reported net income of $787.6 million for the second quarter of 2020, an increase of 84.6% compared to $426.6 million in the second quarter of 2019. Diluted EPS increased by 89.1% to $3.12 for the second quarter of 2020 compared to diluted EPS of $1.65 in the second quarter of 2019. Net income and diluted EPS for the second quarter of 2020 increased 74.8% and 79.3%, respectively, compared to Adjusted net income and Adjusted diluted EPS of $450.7 million1 and $1.741, respectively. Adjusted net income and Adjusted diluted EPS for the second quarter of 2019 excluded the after-tax impact of the Significant Legal Expenses of approximately $24.1 million, or $0.09 per diluted share.
For the 26-week period ended July 31 net sales increased 25.9% to $17.1 billion, compared to $13.6 billion in the comparable 2019 period. Net income for the year-to-date period was $1.4 billion, an increase of 77.2% compared to $811.6 million in the comparable 2019 period.