Dollar General Q2 earnings beat expectations

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Net sales increased 9.0% to $9.4 billion

GOODLETTSVILLE, Tenn. — Dollar General reported fiscal second-quarter earnings that beat Wall Street estimates. The retailer also raised its sales outlook for the year.

Dollar GeneralThe value retailer said Thursday that its net sales for the quarter ended July 29 increased 9%, to $9.4 billion, and same-store sales increased 4.6%. The company’s operating profit for the period increased 7.5%, to $913 million, and its diluted earnings per share (“EPS”) increased 10.8% to $2.98.

“We are pleased with our second quarter results, and I want to thank our associates for delivering another quarter of strong performance during a period of inflation and economic uncertainty,” Dollar General CEO Todd Vasos said. “The quarter was highlighted by same-store sales growth of 4.6%, a slight increase in customer traffic, accelerated growth in market share of highly consumable product sales, and double-digit growth in EPS.

“During the quarter, we also made significant progress advancing our operating priorities and strategic initiatives, further enhancing our unique value and convenience proposition. Looking ahead, we are confident that our strategic actions, which have transformed this company in recent years and solidified Dollar General as the clear leader in small-box discount retail, have positioned us well for continued success while supporting long-term shareholder value creation.”

Second Quarter 2022 Highlights

Net sales increased 9.0% to $9.4 billion in the second quarter of 2022 compared to $8.7 billion in the second quarter of 2021. The net sales increase was primarily driven by positive sales contributions from new stores and growth in same-store sales, partially offset by the impact of store closures. Same-store sales increased 4.6% compared to the second quarter of 2021, driven primarily by an increase in average transaction amount, as well as a slight increase in customer traffic. Same-store sales in the second quarter of 2022 included growth in the consumables category, partially offset by declines in each of the apparel, seasonal, and home products categories.

Gross profit as a percentage of net sales was 32.3% in the second quarter of 2022 compared to 31.6% in the second quarter of 2021, an increase of 69 basis points. This gross profit rate increase was primarily attributable to higher inventory markups; partially offset by an increased LIFO provision, which was driven higher by product costs; a greater proportion of sales coming from the consumables category, which generally has a lower gross profit rate than other product categories; and increases in markdowns, transportation costs, distribution costs, and inventory damages.

Selling, general and administrative expenses (“SG&A”) as a percentage of net sales were 22.6% in the second quarter of 2022 compared to 21.8% in the second quarter of 2021, an increase of 82 basis points. The primary expenses that were a greater percentage of net sales in the current year period were retail labor, repairs & maintenance, utilities and payroll taxes.

Operating profit for the second quarter of 2022 increased 7.5% to $913.4 million compared to $849.6 million in the second quarter of 2021.

The effective income tax rate in the second quarter of 2022 was 22.1% compared to 21.4% in the second quarter of 2021. This higher effective income tax rate was primarily due to a reduced benefit from stock-based compensation, partially offset by a lower effective state income tax rate in the 2022 period when compared to the 2021 period.

The company reported net income of $678.0 million for the second quarter of 2022, an increase of 6.4% compared to $637.0 million in the second quarter of 2021. Diluted EPS increased 10.8% to $2.98 for the second quarter of 2022 compared to diluted EPS of $2.69 in the second quarter of 2021.

Outlook for the remainder of fiscal year 2022

Dollar General has also updated its sales guidance, and reiterated the remainder of its financial guidance, for the 53-week 2022 fiscal year ending February 3. The company now expects net sales growth of approximately 11%, including an estimated benefit of approximately two percentage points from the 53rd week. That compares to its previous expectation of approximately 10.0% to 10.5%, including an estimated benefit of approximately two percentage points from the 53rd week. Dollar General is now expecting same-store sales growth of approximately 4.0% to 4.5%, up from its previous expectation of approximately 3.0% to 3.5%.

The company continues to expect the following:

  • Diluted EPS growth in the range of approximately 12% to 14%, including an estimated benefit of approximately four percentage points from the 53rd week; this diluted EPS guidance now assumes a revised expectation of an effective tax rate in the range of 22.0% to 22.5%; compared to its previous expectation in the range of 22.5% to 23.0%;
  • Share repurchases of approximately $2.75 billion; and
  • Capital expenditures, including those related to investments in the company’s strategic initiatives, in the range of $1.4 billion to $1.5 billion.

Dollar General said that as a result of ongoing delays in permitting and the receipt of construction materials associated with new store openings, it’s updating its plans for real estate projects for fiscal year 2022. The company now plans to execute 2,930 to 2,980 real estate projects, including 1,010 to 1,060 new store openings, approximately 1,795 remodels, and approximately 125 store relocations. This is compared to its previous expectation to execute 2,980 real estate projects, including 1,110 new store openings, 1,750 remodels, and 120 store relocations.


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