01—Abstract
Summary
Summary of the 10-K filed March 24, 2023. Cited figures are marked; the original filing is the authoritative source.
Dollar General Corporation's (DG) 10-K filing for the fiscal year ended February 3, 2023, highlights a year of robust sales growth, driven primarily by price increases and an increase in average transaction value, although customer traffic saw a decline.
The company expanded its store footprint with 1,039 new store openings, contributing to a 10.6%a increase in net sales. Despite challenges like higher inventory damages, increased SG&A expenses, and a higher LIFO provision, the company reported a slight increase in operating profit and maintained strong cash flow from operations. Strategic initiatives like DG Fresh and expansion into new markets, including Mexico, demonstrate a focus on future growth.
Investors should note the persistent sales mix shift towards lower-margin consumables, which impacted gross profit margins, and the planned significant capital expenditures for fiscal year 2023, including new store openings and remodels, which will be funded through operating cash flow and existing credit facilities. The company also continues its share repurchase program and dividend payments, signaling a commitment to shareholder returns, though cautious management of inventory levels and supply chain costs remains crucial.
02—Key points
Key Highlights
- Net sales increased by 10.6% to $37.8 billion, primarily driven by a 4.3% increase in same-store sales due to higher average transaction amounts (largely from inflation), partially offset by a decline in customer traffic.
- The company opened 1,039 new stores, bringing the total store count to 19,147 locations across 47 states and Mexico, with plans to open approximately 1,050 new stores in fiscal year 2023.
- Gross profit rate decreased by 37 basis points to 31.2% due to higher LIFO provision, a greater proportion of lower-margin consumables sales, and increased inventory markdowns, damages, and shrink.
- Selling, general, and administrative (SG&A) expenses as a percentage of net sales increased by 25 basis points, mainly due to higher utilities, retail labor, and repairs and maintenance costs.
- Operating profit saw a modest increase of 3.3% to $3.33 billion, while net income increased slightly by 0.7% to $2.42 billion.
- Cash flow from operating activities decreased by 30.8% to $1.98 billion, largely due to changes in merchandise inventories and accounts payable.
- The company repurchased approximately 11.6 million shares of common stock for $2.7 billion and increased its quarterly cash dividend.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Dollar General Corp kept $0.06.
- Revenue$37.84B100.0%
- Cost of revenue−$26.02B68.8%
- Gross profit$11.82B31.2%
- Operating costs−$8.49B22.4%
- Operating income$3.33B8.8%
- Interest, other & tax−$912.3M2.4%
- Net income$2.42B6.4%
Where FY2023 revenue went
$37.84B- Cost of revenue: $26.02B, 69% of revenue
- SG&A: $8.49B, 22% of revenue
- Net income: $2.42B, 6.4% of revenue
- Interest, other & tax: $912.3M, 2.4% of revenue
Kept 6.4% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed March 24, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $37.84B$34.22B | +10.6% |
| Cost of Revenue | $26.02B$23.41B | +11.2% |
| Gross Profit | $11.82B$10.81B | +9.3% |
| SG&A Expenses | $8.49B$7.59B | +11.8% |
| Operating Income | $3.33B$3.22B | +3.3% |
| Interest Expense | $211.27M$157.53M | +34.1% |
| Net Income | $2.42B$2.40B | +0.7% |
| EPS (Basic) | $10.73$10.24 | +4.8% |
| EPS (Diluted) | $10.68$10.17 | +5.0% |
| Shares Outstanding (Basic) | 225.15M234.26M | −3.9% |
| Shares Outstanding (Diluted) | 226.30M235.81M | −4.0% |
05—Questions
Frequently Asked Questions
What were the primary drivers of Dollar General's sales growth in fiscal year 2022?
Dollar General's net sales increased by 10.6% in fiscal year 2022. This growth was primarily driven by a 4.3% increase in same-store sales, which was largely attributed to a higher average transaction amount, reflecting the impact of inflation on retail prices. While customer traffic declined, the increase in the average amount spent per transaction by customers compensated for this decrease.
What challenges did Dollar General face regarding its gross profit margin?
Dollar General experienced a decrease in its gross profit rate by 37 basis points in fiscal year 2022. This was primarily due to a higher LIFO (Last-In, First-Out) provision, a larger sales mix towards lower-margin consumables, and increased inventory markdowns, damages, and shrink. These factors negatively impacted the company's profitability on its sales.
How is Dollar General planning to invest in future growth?
Dollar General plans to continue its growth strategy by opening approximately 1,050 new stores in fiscal year 2023, along with remodeling or relocating around 2,000 stores. The company is also expanding its presence internationally, with plans for around 20 stores in Mexico by the end of 2023. Additionally, strategic initiatives like the DG Fresh program and the pOpshelf concept are ongoing investments aimed at driving future sales and profitability.
What is the company's financial position regarding debt and liquidity?
As of February 3, 2023, Dollar General reported total consolidated outstanding debt of $7.0 billion. The company has access to significant liquidity through its $2.0 billion revolving credit facility and a $750 million 364-day revolving credit facility, along with its commercial paper program. Management believes its cash flow from operations and available credit facilities provide sufficient liquidity for its obligations and strategic investments.
06—Continue