10-QPeriod: Q1 FY2012

DOLLAR GENERAL CORP Quarterly Report for Q1 Ended Apr 29, 2011

Filed June 1, 2011For Securities:DG

Summary

Dollar General Corporation (DG) reported strong performance for the first quarter ended April 29, 2011. Net sales increased by 10.9% to $3.45 billion, driven by a 5.4% same-store sales increase, indicating robust customer traffic and higher average transaction amounts. This growth was achieved while maintaining a focus on everyday low prices, even though the gross profit margin slightly decreased to 31.5% from 32.1% year-over-year, primarily due to strategic markdowns and a shift in sales mix towards lower-margin consumables. Operating profit saw a healthy increase of 10.6% to $321.6 million. Net income rose by 15.4% to $157.0 million, translating to diluted earnings per share of $0.45, up from $0.39 in the prior year. The company's strategic initiatives, including store growth and operational efficiencies, appear to be paying off. Dollar General opened 139 new stores in the quarter and plans for significant expansion throughout the year, demonstrating confidence in its growth strategy. The company also reported a significant increase in cash flow from operations, reaching $223.6 million, and maintained a strong cash position.

Financial Highlights

43 data points
Beta

Revenue

$3.45B

31.5% Gross Margin

Net Income

$156.97M

4.5% Net Margin

EPS (Diluted)

$0.45

Total Assets

$9.71B

Cash & Equivalents

$602.46M

Free Cash Flow

$223.57M

Financial Statements
Beta
Revenue$3.45B
Cost of Revenue$2.36B
Gross Profit$1.09B
SG&A Expenses$765.78M
Operating Income$321.62M
Interest Expense$65.57M
Net Income$156.97M
EPS (Basic)$0.46
EPS (Diluted)$0.45
Shares Outstanding (Basic)341.52M
Shares Outstanding (Diluted)345.39M

Key Highlights

  • 1Net sales increased 10.9% to $3.45 billion for the first quarter.
  • 2Same-store sales grew by 5.4%, reflecting increased customer traffic and transaction amounts.
  • 3Net income increased by 15.4% to $157.0 million, with diluted EPS rising to $0.45 from $0.39.
  • 4Gross profit margin slightly decreased to 31.5% from 32.1%, influenced by strategic markdowns and a shift in sales mix towards consumables.
  • 5Operating profit increased by 10.6% to $321.6 million.
  • 6The company opened 139 new stores in the quarter, with plans for significant further expansion.
  • 7Cash flow from operating activities significantly increased to $223.6 million.

Frequently Asked Questions

The primary driver of Dollar General's sales growth was a 5.4% increase in same-store sales, which was fueled by higher customer traffic and an increased average transaction amount. This growth was supported by strategic initiatives such as improved store standards, expanded merchandise offerings, and enhanced marketing efforts.

The gross profit margin decreased from 32.1% to 31.5% primarily due to strategic decisions to take higher markdowns to drive sales and build customer loyalty in a challenging economic environment. Additionally, a shift in the sales mix towards consumables, which typically have lower gross profit margins, and increased transportation costs also contributed to the decrease.

Dollar General is pursuing an aggressive growth strategy focused on new store openings, relocations, and remodels. In the first quarter of 2011, they opened 139 new stores and plan to open approximately 625 new stores for the full fiscal year, including entering new states like Connecticut, New Hampshire, and Nevada. They are also developing a strategy for entry into California in 2012.

Dollar General has a substantial credit facility providing significant borrowing capacity. The company is focused on generating strong cash flow from operations, which was $223.6 million in the first quarter. They also manage debt through strategic debt repayments and repurchases, such as the $25 million repurchase of senior notes during the quarter. The company believes its existing cash, operational cash flow, and credit facilities provide sufficient liquidity for its obligations and capital expenditures.