10-QPeriod: Q2 FY2018

DOLLAR GENERAL CORP Quarterly Report for Q2 Ended May 5, 2017

Filed June 1, 2017For Securities:DG

Summary

Dollar General Corporation (DG) reported its first quarter results for the period ending May 5, 2017. Net sales increased by 6.5% to $5.61 billion, driven by a 0.7% increase in same-store sales. This same-store sales growth was primarily attributable to an increase in the average transaction amount, although customer traffic saw a slight decline. The company's gross profit margin slightly compressed to 30.3% from 30.6% in the prior year, mainly due to increased markdowns and a shift in sales mix towards lower-margin consumables. While net income saw a decrease of 5.3% to $279.5 million, or $1.02 per diluted share, compared to $295.1 million, or $1.03 per diluted share, in the prior year, operating cash flow improved significantly by $106.5 million to $510.5 million. This improvement in cash flow was supported by better inventory management and changes in tax payment timing. The company continues its strategic initiatives to drive profitable sales growth, capture market opportunities, maintain its low-cost operator position, and invest in its employees. DG also provided an update on its expansion plans, including the expected acquisition of 322 stores, and reaffirmed its commitment to shareholder returns through ongoing share repurchases and dividends.

Financial Highlights

45 data points
Beta

Revenue

$5.61B

30.3% Gross Margin

Net Income

$279.49M

5.0% Net Margin

EPS (Diluted)

$1.02

Total Assets

$11.80B

Cash & Equivalents

$205.98M

Free Cash Flow

$510.46M

Financial Statements
Beta
Revenue$5.61B
Cost of Revenue$3.91B
Gross Profit$1.70B
SG&A Expenses$1.23B
Operating Income$473.80M
Interest Expense$25.00M
Net Income$279.49M
EPS (Basic)$1.02
EPS (Diluted)$1.02
Shares Outstanding (Basic)274.69M
Shares Outstanding (Diluted)275.21M

Key Highlights

  • 1Net sales increased 6.5% to $5.61 billion in Q1 2017.
  • 2Same-store sales grew by 0.7%, driven by a higher average transaction amount, though customer traffic declined.
  • 3Gross profit margin decreased slightly to 30.3% due to higher markdowns and a less favorable sales mix.
  • 4SG&A expenses as a percentage of net sales increased by 34 basis points to 21.8%, mainly due to higher labor and occupancy costs.
  • 5Net income decreased 5.3% to $279.5 million ($1.02 per diluted share) compared to the prior year.
  • 6Operating cash flow saw a significant increase of $106.5 million, reaching $510.5 million.
  • 7The company plans to open approximately 1,290 new stores and acquire an additional 322 stores in fiscal year 2017.

Frequently Asked Questions

Net sales increased by 6.5% to $5.61 billion. This growth was primarily driven by a 0.7% increase in same-store sales, which was fueled by a higher average transaction amount, although customer traffic experienced a slight decrease during the period.

The gross profit margin compressed by 34 basis points to 30.3% compared to the prior year. This was mainly attributed to increased markdowns for inventory clearance and promotional activities, as well as a shift in the sales mix towards consumables, which typically have lower gross profit margins.

Net income decreased by 5.3% to $279.5 million, or $1.02 per diluted share, compared to $295.1 million, or $1.03 per diluted share, in the same period last year. This decline was influenced by the decrease in gross profit margin and an increase in SG&A expenses as a percentage of net sales.

Dollar General plans to open approximately 1,290 new stores and relocate or remodel approximately 760 stores in fiscal year 2017. Additionally, the company is in the process of acquiring 322 stores from a smaller retailer, which is expected to close in June 2017 and be converted to the Dollar General banner by the end of November 2017.