Dollar General Lifted Sales Outlook Despite Inflationary Pressures

Scott Peters
26 May, 2022
New York City

Dollar General's earnings fell after the higher product costs and customers sticking to basic items impacted quarterly results.  

Sales and earnings jumped after the company passed on higher prices more than inflation to customers. 

The retailer reported net sales in the first quarter fiscal year 2022 ending on April 29 increased 4.2% to $8.8 billion and comparable sales decreased 0.1%. 

In the period, consumables sales increased 9.1% to $6.9 billion, seasonal products sales fell 8.5% to $961 million, apparel sales plunged 28% to $289.6 million, and home products sales declined 5.5% to $539.8 million. 

Net income in the quarter fell 18% to $552.65 million and diluted earnings per share fell to $2.41 from $2.82 a year ago. 

Diluted earnings per share decreased 14.5% to $2.41. 

Gross profit margin declined to 31.3% from 32.8% a year ago, operating margin fell to 8.5% from 10.8%, and net income margin fell to 6.3% from 8.1%.  

Inventories at the end of the quarter increased to $6.1 billion from $5.1 billion a year ago, an increase of 13.3% on a per-store basis. 

Cash flow from operations in the quarter declined to $449.5 million from $702.9 million. 

During the quarter the company opened 239 new stores, remodeled 532 stores, and relocated 32 stores and capital expenditures were $282 million. 

In the quarter, the company repurchased $747 million of its common stock, or 3.4 million shares, at an average price of $220.13 per share. 

Under its share repurchase program at the end of the first quarter $1.4 billion were still available. 

On May 25, 2022, the Board of Directors declared a quarterly cash dividend of $0.55 per share on the common stock, payable on or before July 19, 2022 to shareholders of record on July 5, 2022.

Guidance and Outlook 

The company lifted its annual sales outlook to a range between 10% and 10.5% from the previous estimate of 10% including 2% benefit from the additional week in the current fiscal year. 

Same store sales are expected to rise between 3% and 3.5% compared to the previous estimate of 2.5%. 

Diluted earnings per share to increase between 12% and 14% and plans to repurchase $2.75 billion of its shares. 

The company also reiterated its plans to execute 2,980 real estate projects in fiscal year 2022, including 1,110 new store openings, 1,750 remodels, and 120 store relocations.

In the quarter, the company executed 800 real estate projects. 

Company and Stock 

Dollar General, headquartered in Goodlettsville, Tennessee operates 18,356 stores with a total of 136.5 million retail square foot space. 

In the quarter, the company increased retail space by 5.8% matching the rate a year ago. 

Dollar General soared 17% to $228.82 after the deep discount retailer reported first quarter results. 

For the year-so-far, Dollar General stock has declined 5.3%.