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Dollar General Earnings Call Highlights

Author: 123jump.com Staff
Last Update: 10:33 PM ET June 07 2012
Dollar General first quarter sales increased 13% to $3.9 billion and net income soared 36% to $213 million. Same store sales rose 6.7% as the company gains market share at the expense of grocery chains and convenience stores.

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Dollar General Corporation (DG), the discount retailer reported net revenues in the first quarter ending on May 4 increased 13% to $3.90 billion compared to $3.45 billion in the same period last year. Same store sales increase 6.7% and both customer traffic and average ticket increase for the 17th consecutive quarter.

Net income in the quarter surged 36% to $213 million or 63 cents per diluted share compared to $157 million or 45 cents a share in the quarter a year ago.

- The retailer said it filed a preliminary filing to offer 25 million shares from several of its shareholders and up to 3.75 million shares to cover over allotment. The company will not offer any share in the offering.

- Investor conference is scheduled in Nashville, Tennessee on June 25 and 26.

First Quarter Financial Performance

- Sales were strong in every area of our consumable and seasonal category and home related items retained positive momentum. Spring and summer seasonal sales had a strong and early start due to warm weather.

- Operating profit excluding $13 million litigation charge of 2011 and secondary offering expenses in 2012 rose 15% to $385 million or 9.9% of sales.

- Interest expense fell by $28 million and adjusted net income increased 29% to $215 million. Interest expense decreased to $37 million in the quarter from $66 million a year ago quarter.

- The effective tax rate for the quarter was 38.2% compared to 38.1% in the quarter a year ago.

- Adjusted earnings per share increased 31% to $0.63 per share.

- For the quarter gross profit grew 13% and declined 2 basis points or essentially flat from a year ago at 31.5% of sales. Leveraged distribution and transportation cost, even rates of diesel fuel price increased 7% and in the quarter accompanied by two new distribution centers online.

- Inventory shrinkage in the quarter from a year ago was favorable and markups at the beginning of the quarter were higher than a year ago. LIFO provision for the quarter was $1.6 million compared to $3.6 million from a year ago period about 6 basis point favorable impacts. But, these were offset by higher markdowns on consumables and on new apparel strategies.

- SG&A expense in the quarter were 21.6% of sales, a improvement of 20 basis point after excluding $1 million expense related to secondary offering and $13.1 million related to litigation settlement in quarter of last year.

- The 20 basis point improvements was from increase of sales and better utilization of store labor which was due to benefits from our workforce management system. Also management focus on lowering operating costs and cutting rent expense contributed to savings.

- Several expense items increased at a higher rate than increase in sales including fees associated with the increased use of debit cards, cost associated with opening new distribution centers. Worker’s compensation and general liability insurance and advertising cost rose and worker’s comp cost increased from a year ago due to more stores and labor hours and higher medical cost. Accidents incident rate continues to decrease in stores.

- First quarter net income increased 36% to $213 million and on adjusted basis net income increased 29% to $215 million compared to $166 million last year. Adjusted earnings per share increased 31% to $0.63 per share.

- Cash from operations was $193 million, down $31 million from a year ago. Net income increase was partially offset by higher income tax and timing and the mix differences and domestic supplier payments. Working capital accounts were affected by our 53 week of fiscal year in 2011 and anticipate minimal impact for the full year.

- As of quarter end on May 4 total inventories grew 13% to $2 billion in total and 7% on a per store basis in line with sales growth. Our inventory turn was 5.3 times sales.

- Capital expenditures for the quarter totaled $146 million including $33 million related to new fleet stores, $36 million for stores related to stores that were purchased or built and $41 million for upgrading, remodeling and relocating expenses of existing stores. Distribution and transportation expenses were $31 million and $4 million for the upgrading of information systems.

- In the quarter Dollar General opened 128 new stores and remodeled or relocated 224 stores.

- On April 2 the company purchased 6.8 million shares for $300 million using borrowing under the company debt revolver. Additional stock purchases are likely in the fourth quarter of the year.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc