10-KPeriod: FY2018

DOLLAR GENERAL CORP Annual Report, Year Ended Feb 2, 2018

Filed March 23, 2018For Securities:DG

Summary

Dollar General Corporation, as of its March 23, 2018, 10-K filing, stands as a leading discount retailer in the U.S., operating over 14,600 stores across 44 states. The company's business model is centered on providing essential everyday and household needs at "everyday low prices" (typically $10 or less) within convenient, small-box locations, catering to a value-conscious customer base, often with low or fixed incomes. This strategy has fueled 28 consecutive years of positive same-store sales growth prior to this filing. Financially, the company demonstrated solid performance in fiscal year 2017, with net sales increasing by 6.8% year-over-year, driven by a 2.7% same-store sales increase and contributions from new store openings. While the gross profit rate saw a slight decrease due to a shift towards higher-volume, lower-margin consumables, and increased transportation costs, operating profit remained robust. A significant factor influencing net income was the impact of the Tax Cuts and Jobs Act, which led to a substantial reduction in the effective income tax rate. The company continued to prioritize shareholder returns through share repurchases and dividend payments, signaling a commitment to capital discipline and growth.

Financial Highlights

47 data points
Beta

Revenue

$23.47B

30.8% Gross Margin

Net Income

$1.54B

6.6% Net Margin

EPS (Diluted)

$5.63

Total Assets

$12.52B

Cash & Equivalents

$267.44M

Free Cash Flow

$1.80B

Financial Statements
Beta
Revenue$23.47B
Cost of Revenue$16.25B
Gross Profit$7.22B
SG&A Expenses$5.21B
Operating Income$2.01B
Interest Expense$97.04M
Net Income$1.54B
EPS (Basic)$5.64
EPS (Diluted)$5.63
Shares Outstanding (Basic)272.75M
Shares Outstanding (Diluted)273.36M

Key Highlights

  • 1Operates a vast network of 14,609 stores across 44 states, positioning itself as a major U.S. discount retailer.
  • 2Achieved 28 consecutive years of positive same-store sales growth prior to this filing, highlighting a resilient business model.
  • 3Net sales increased by 6.8% in fiscal year 2017, driven by a 2.7% same-store sales growth and expansion through new store openings.
  • 4Gross profit rate experienced a slight decrease due to a sales mix shift towards consumables and increased transportation costs.
  • 5Significant reduction in effective income tax rate in 2017 due to the Tax Cuts and Jobs Act, positively impacting net income.
  • 6Active in returning capital to shareholders through substantial share repurchases and quarterly dividend payments.
  • 7Plans for continued growth in 2018, with approximately 900 new stores, 1,000 remodels, and 100 relocations planned.

Frequently Asked Questions

Dollar General's core strategy is to offer a broad selection of everyday necessities and general merchandise at "everyday low prices" (typically $10 or less) in convenient, small-box locations. Their primary target customers are value-conscious individuals and households, often with low or fixed incomes, who rely on the company for essential needs and convenience.

The Tax Cuts and Jobs Act, enacted in December 2017, significantly reduced the federal corporate tax rate. For Dollar General, this resulted in a provisional tax benefit of $335 million in 2017, primarily due to the remeasurement of deferred tax assets and liabilities at the new, lower rate. This substantially lowered the company's effective income tax rate for the year.

For fiscal year 2018, Dollar General plans to continue its expansion strategy by opening approximately 900 new stores, remodeling around 1,000 mature store locations, and relocating about 100 stores. They are also focusing on leveraging digital tools, refreshing non-consumables offerings, expanding cooler counts, and enhancing the customer experience through initiatives like improved store layouts and product placements.

Key risks include adverse economic conditions impacting their value-conscious customer base, intense competition, supply chain disruptions, inventory shrinkage, cybersecurity threats, and potential issues related to product liability or recalls. Additionally, changes in government regulations or the failure to successfully execute strategic initiatives are also cited as potential risks.