10-QPeriod: Q3 FY2009

DOLLAR GENERAL CORP Quarterly Report for Q3 Ended Oct 31, 2008

Filed December 3, 2008For Securities:DG

Summary

Dollar General Corporation reported its third-quarter results for the period ending October 31, 2008. The company experienced a net loss of $7.3 million, a significant improvement from the $33.0 million net loss in the same period last year. Net sales increased by 12.4% to $2.6 billion, driven by a strong 10.6% increase in same-store sales. This growth was attributed to increased customer transactions and average transaction value, reflecting consumer response to value and convenience amid challenging economic conditions. The company also saw a notable improvement in gross profit margin, which rose to 29.7% from 28.0%, benefiting from higher markups, improved inventory shrink, and lower markdowns, although partially offset by a LIFO charge. A significant event impacting the quarter was the recording of a $34.5 million charge related to a preliminary settlement of a class action lawsuit concerning the 2007 merger. Despite this charge, the company's operational performance showed positive trends. Management highlighted strategic initiatives focused on driving sales growth, increasing gross margins, reducing costs, and strengthening company culture. The company continues to expand its store base, with plans to open approximately 200 new stores and remodel or relocate 400 stores in fiscal year 2008. Overall, Dollar General demonstrated resilience in a tough economic environment with improved sales and profitability metrics.

Key Highlights

  • 1Net sales increased by 12.4% year-over-year to $2.6 billion.
  • 2Same-store sales grew by a strong 10.6%, indicating positive customer traffic and spending.
  • 3Gross profit margin improved to 29.7% from 28.0%, driven by pricing and efficiency gains.
  • 4Net loss significantly narrowed to $7.3 million from $33.0 million in the prior year's quarter.
  • 5A $34.5 million charge was recorded for a preliminary settlement of merger-related shareholder litigation.
  • 6The company continues its expansion strategy, on track to open approximately 200 new stores in fiscal year 2008.

Frequently Asked Questions

Dollar General reported a net sales increase of 12.4% for the 13-week period ended October 31, 2008, reaching $2.599 billion compared to $2.313 billion in the same period of 2007. This growth was primarily driven by a 10.6% increase in same-store sales.

The gross profit margin increased to 29.7% from 28.0% in the prior year quarter. This improvement was due to higher average markups, better inventory shrink control, lower markdowns, and increased leverage from higher sales volumes and distribution efficiencies. These factors more than offset increased fuel costs and a LIFO charge related to inventory costs.

The company recorded a charge of approximately $34.5 million in the third quarter of 2008 related to a preliminary agreement to settle a class action lawsuit filed by shareholders concerning the 2007 merger. This charge is net of anticipated insurance proceeds.

As of October 31, 2008, Dollar General operated 8,346 stores in 35 states. For the 39 weeks ended October 31, 2008, the company opened 175 new stores, relocated 78 stores, remodeled 278 stores, and closed 23 stores, and remained on track to open approximately 200 new stores and remodel or relocate 400 stores in fiscal year 2008.