10-QPeriod: Q1 FY2011

DOLLAR GENERAL CORP Quarterly Report for Q1 Ended Apr 30, 2010

Filed June 8, 2010For Securities:DG

Summary

Dollar General Corporation (DG) reported strong first-quarter results for the period ended April 30, 2010, showcasing significant year-over-year growth. Net sales increased by 11.9% to $3.11 billion, driven by a healthy 6.7% same-store sales increase, indicating growing customer traffic and transaction values. This sales momentum, coupled with effective cost management and strategic merchandise mix improvements, led to a substantial 63.8% increase in net income to $136.0 million, translating to diluted earnings per share of $0.39, up from $0.26 in the prior year period. The company demonstrated improved operational efficiency, with gross profit margin expanding to 32.1% from 30.8%, attributed to higher markups and better global sourcing. While Selling, General, and Administrative (SG&A) expenses as a percentage of sales saw a slight increase due to one-time costs related to a secondary stock offering, operational performance was strong, leading to a significant improvement in operating profit margin by 125 basis points. The company also effectively managed its debt, with interest expense decreasing by 19.3% due to lower outstanding borrowings. Dollar General continues its strategic expansion, opening 155 new stores in the quarter and maintaining a disciplined approach to capital allocation. The company's focus on its four key operating priorities—driving productive sales growth, increasing gross margins, leveraging process improvements, and strengthening its culture—appears to be yielding positive results, positioning it well in the current economic environment. Investors should note the continued strength in same-store sales and improving profitability metrics.

Financial Highlights

24 data points
Beta

Revenue

$3.11B

32.1% Gross Margin

Net Income

$136.00M

4.4% Net Margin

EPS (Diluted)

$0.39

Cash & Equivalents

$222.71M

Free Cash Flow

$91.21M

Financial Statements
Beta
Revenue$3.11B
Cost of Revenue$2.11B
Gross Profit$999.76M
SG&A Expenses$709.03M
Operating Income$290.72M
Interest Expense$72.02M
Net Income$136.00M
EPS (Basic)$0.40
EPS (Diluted)$0.39
Shares Outstanding (Basic)340.82M
Shares Outstanding (Diluted)344.40M

Key Highlights

  • 1Net sales increased 11.9% year-over-year to $3.11 billion.
  • 2Same-store sales grew 6.7%, driven by increased customer traffic and average transaction amount.
  • 3Net income more than doubled, rising 63.8% to $136.0 million.
  • 4Diluted earnings per share increased to $0.39 from $0.26 in the prior year period.
  • 5Gross profit margin improved to 32.1% from 30.8%, reflecting better markups and sourcing efficiencies.
  • 6Operating profit margin expanded by 125 basis points to 9.34%.
  • 7The company opened 155 new stores during the quarter, continuing its expansion strategy.

Frequently Asked Questions

The substantial increase in net sales was primarily driven by a robust 6.7% growth in same-store sales, reflecting higher customer traffic and an increased average transaction amount. This was further supported by sales from the 155 new stores opened during the quarter, partially offset by sales from closed stores.

Profitability was enhanced through several key initiatives. Gross profit margin improved due to higher average markups, strategic increases in private brand offerings, and better global sourcing capabilities, which helped reduce product costs. Operating profit also saw significant improvement due to increased sales volume and disciplined management of SG&A expenses, despite some one-time costs related to a secondary stock offering.

Dollar General continues its growth strategy with plans to open approximately 600 new stores in fiscal 2010, having already opened 155 in the first quarter. The company believes its operating cash flow, existing cash balances, and availability under its credit facilities provide sufficient liquidity for its obligations, working capital needs, and capital expenditures for the foreseeable future.

The company is involved in several legal proceedings, including class-action lawsuits concerning store manager classification, wage and hour claims, and equal pay allegations. While the company believes it has strong defenses, adverse resolutions in these matters could have a material adverse effect on its financial statements. Investors should refer to Note 7 in the filing for detailed information on these and other contingencies.