10-QPeriod: Q3 FY2016

DOLLAR GENERAL CORP Quarterly Report for Q3 Ended Oct 30, 2015

Filed December 3, 2015For Securities:DG

Summary

Dollar General Corporation reported solid financial performance for the third quarter and the first nine months of fiscal year 2015, ending October 30, 2015. Net sales increased by 7.3% to $5.07 billion for the quarter and 8.0% to $15.08 billion for the year-to-date period, driven by a 2.3% same-store sales increase in the quarter and 2.9% year-to-date. This growth was attributed to higher customer traffic and an increased average transaction amount across all product categories. The company demonstrated effective cost management, with gross profit margin improving by 19 basis points to 30.3% in the quarter due to better inventory shrinkage and lower transportation costs. Despite an increase in SG&A as a percentage of sales, largely due to restructuring costs, net income rose to $253.3 million ($0.86 per diluted share) for the quarter and $788.9 million ($2.65 per diluted share) for the nine months, reflecting improved operating profit and the positive impact of share repurchases. Financially, Dollar General strengthened its capital structure through a significant refinancing in October 2015, issuing new senior notes and amending its credit facilities. The company also continued its robust share repurchase program, returning substantial capital to shareholders. While facing some ongoing legal proceedings, the company expressed confidence in its operational execution and financial stability to navigate the next twelve months and beyond.

Financial Highlights

44 data points
Beta

Revenue

$5.07B

30.3% Gross Margin

Net Income

$253.32M

5.0% Net Margin

EPS (Diluted)

$0.86

Total Assets

$11.29B

Cash & Equivalents

$182.51M

Free Cash Flow

$438.90M

Financial Statements
Beta
Revenue$5.07B
Cost of Revenue$3.53B
Gross Profit$1.54B
SG&A Expenses$1.11B
Operating Income$423.86M
Interest Expense$21.39M
Net Income$253.32M
EPS (Basic)$0.87
EPS (Diluted)$0.86
Shares Outstanding (Basic)292.04M
Shares Outstanding (Diluted)292.90M

Key Highlights

  • 1Net sales increased by 7.3% to $5.07 billion for the 13-week period ended October 30, 2015, and by 8.0% to $15.08 billion for the 39-week period ended October 30, 2015.
  • 2Same-store sales increased by 2.3% for the 13-week period and 2.9% for the 39-week period, driven by both customer traffic and average transaction amount.
  • 3Gross profit margin improved to 30.3% for the 13-week period and 30.7% for the 39-week period, benefiting from reduced inventory shrinkage and lower transportation costs.
  • 4Net income increased to $253.3 million ($0.86 per diluted share) for the 13-week period and $788.9 million ($2.65 per diluted share) for the 39-week period.
  • 5The company completed a significant refinancing in October 2015, including the issuance of $500 million in senior notes and amending its credit facilities, demonstrating proactive capital management.
  • 6Dollar General continued its aggressive share repurchase program, spending $1.0 billion in the 39-week period, and announced a further $1.0 billion increase to its authorization in December 2015.
  • 7Operating cash flow for the 39-week period was $780.5 million, though lower than the prior year primarily due to increased inventory purchases.

Frequently Asked Questions

Dollar General reported a 7.3% increase in net sales, reaching $5.07 billion for the 13-week period ended October 30, 2015. This growth was driven by a 2.3% increase in same-store sales, attributed to higher customer traffic and an increased average transaction amount.

The company focuses on several strategies to enhance profitability, including improving inventory shrinkage rates, optimizing transportation costs, increasing private brand penetration, and managing the sales mix towards higher-margin products. These efforts contributed to a gross profit margin improvement of 19 basis points to 30.3% in the third quarter of fiscal year 2015.

Dollar General actively manages its capital structure. In October 2015, it completed a refinancing, issuing $500 million in senior notes and amending its credit facilities. The company also returned significant capital to shareholders through a robust share repurchase program, spending $1.0 billion in the first nine months of the fiscal year, and announced a further $1.0 billion increase to its repurchase authorization.

Dollar General is involved in several legal proceedings, including an EEOC lawsuit regarding its criminal background check policy and various wage and hour class action lawsuits in California. While the company believes its policies are lawful and intends to defend itself vigorously, the resolution of these matters could have a material adverse effect on its financial statements. Additionally, ongoing uncertainties in the economy and potential changes in tax laws are noted risks.