10-QPeriod: Q3 FY2012

DOLLAR GENERAL CORP Quarterly Report for Q3 Ended Oct 28, 2011

Filed December 5, 2011For Securities:DG

Summary

Dollar General Corporation's third-quarter results for the period ended October 28, 2011, demonstrate robust top-line growth driven by increased customer traffic and higher average transaction amounts, with net sales rising 11.5% year-over-year to $3.60 billion. This growth was primarily fueled by the expansion of consumable product offerings, a key strategic focus amidst ongoing economic uncertainties impacting consumer discretionary spending. While gross profit margin saw a slight decrease due to a shift towards lower-margin consumables and increased transportation costs, the company effectively managed operating expenses, resulting in an improvement in operating profit margin by 14 basis points. Net income saw a significant increase of 33.6% to $171.2 million, translating to diluted earnings per share of $0.50, up from $0.37 in the prior year. The company also made progress in managing its debt, reducing long-term obligations by $566 million year-over-year. Looking ahead, Dollar General plans continued square footage expansion and further investment in its distribution network to support growth. The company remains focused on driving productive sales, increasing gross profit, leveraging process improvements, and strengthening its culture of service.

Financial Highlights

43 data points
Beta

Revenue

$3.60B

31.0% Gross Margin

Net Income

$171.16M

4.8% Net Margin

EPS (Diluted)

$0.50

Total Assets

$9.74B

Cash & Equivalents

$118.58M

Free Cash Flow

$206.06M

Financial Statements
Beta
Revenue$3.60B
Cost of Revenue$2.48B
Gross Profit$1.12B
SG&A Expenses$804.88M
Operating Income$310.92M
Interest Expense$38.63M
Net Income$171.16M
EPS (Basic)$0.50
EPS (Diluted)$0.50
Shares Outstanding (Basic)341.95M
Shares Outstanding (Diluted)345.78M

Key Highlights

  • 1Net sales increased by 11.5% to $3.60 billion in the third quarter, driven by a 6.3% increase in same-store sales.
  • 2Net income rose significantly by 33.6% to $171.2 million, with diluted EPS reaching $0.50, an increase from $0.37 in the prior year.
  • 3Operating profit margin improved slightly to 8.6% from 8.5% in the prior year's quarter.
  • 4Selling, general, and administrative (SG&A) expenses as a percentage of sales decreased to 22.4% from 22.8% in the prior year's quarter.
  • 5Long-term obligations decreased by $566 million compared to the prior year.
  • 6The company opened 482 new stores and remodeled or relocated 544 existing stores in the 39-week period.
  • 7Standard & Poor's upgraded the corporate rating to BB+ and Moody's raised it to Ba2, both with stable outlooks.

Frequently Asked Questions

The primary driver of sales growth was a combination of increased customer traffic and a higher average transaction amount, leading to a 6.3% increase in same-store sales. The expansion of consumable product offerings was also a key contributor.

The gross profit margin decreased slightly primarily due to a shift in the sales mix towards consumables, which generally have lower gross profit rates than non-consumables. Additionally, increased transportation costs due to higher fuel prices and an increase in the LIFO provision also contributed to the decline.

Dollar General has actively managed its debt by redeeming and repurchasing a significant portion of its 10.625% Senior Notes. As a result, total long-term obligations decreased by $566 million compared to the prior year.

The company's growth strategy includes continued square footage expansion through new store openings and relocations, and investing in its merchandise distribution network by adding new distribution centers. They are also focused on driving productive sales growth, increasing gross profit margins, leveraging process improvements, and strengthening their company culture.