10-QPeriod: Q2 FY2020

DOLLAR GENERAL CORP Quarterly Report for Q2 Ended May 3, 2019

Filed May 30, 2019For Securities:DG

Summary

Dollar General Corporation's (DG) first quarter 2019 results show a robust increase in net sales, driven by a healthy same-store sales growth of 3.8%. This growth was fueled by both an increase in average transaction amount and customer traffic, indicating continued customer demand for DG's value offerings. While gross profit margin saw a slight decrease due to increased distribution costs and a shift towards lower-margin consumables, overall operating profit and net income experienced positive growth. The company continues to execute its growth strategy, marked by aggressive new store openings and remodels. Significant investments are being made in strategic initiatives like 'DG Fresh' and 'Fast Track' to enhance operational efficiency and expand product offerings. Despite some headwinds from rising operating expenses and potential tariff impacts, Dollar General maintains a strong liquidity position and demonstrates a commitment to shareholder returns through dividends and share repurchases, positioning it favorably within its market.

Financial Highlights

44 data points
Beta

Revenue

$6.62B

30.2% Gross Margin

Net Income

$385.01M

5.8% Net Margin

EPS (Diluted)

$1.48

Total Assets

$21.30B

Cash & Equivalents

$271.11M

Free Cash Flow

$574.20M

Financial Statements
Beta
Revenue$6.62B
Cost of Revenue$4.62B
Gross Profit$2.00B
SG&A Expenses$1.49B
Operating Income$512.24M
Interest Expense$25.93M
Net Income$385.01M
EPS (Basic)$1.49
EPS (Diluted)$1.48
Shares Outstanding (Basic)259.02M
Shares Outstanding (Diluted)260.26M

Key Highlights

  • 1Net sales increased by 8.3% to $6.62 billion, with same-store sales growing by 3.8%, driven by both higher average transaction amounts and increased customer traffic.
  • 2Operating profit grew by 4.5% to $512.2 million, and net income rose by 5.5% to $385.0 million, translating to diluted earnings per share of $1.48, an increase from $1.36 in the prior year period.
  • 3Gross profit margin slightly decreased by 23 basis points to 30.2%, attributed to higher distribution/transportation costs and a sales mix favoring lower-margin consumables.
  • 4Selling, General & Administrative (SG&A) expenses as a percentage of net sales increased slightly to 22.5% due to higher employee benefits and occupancy costs.
  • 5The company repurchased approximately $200.0 million of its common stock during the quarter and paid $82.8 million in cash dividends, underscoring its commitment to shareholder returns.
  • 6Dollar General continued its expansion efforts, opening 240 new stores and remodeling 330 stores in the quarter, with plans for significant further expansion throughout the year.
  • 7Adoption of new lease accounting standards resulted in substantial operating lease assets and liabilities appearing on the balance sheet, though it did not impact historical net income or cash flows.

Frequently Asked Questions

Dollar General reported a strong performance in net sales, which increased by 8.3% to $6.62 billion compared to the same period in 2018. This growth was primarily driven by a 3.8% increase in same-store sales, which benefited from higher average transaction amounts and increased customer traffic.

Dollar General adopted new lease accounting guidance effective February 2, 2019. This resulted in the recognition of significant operating lease assets and liabilities on the balance sheet, totaling approximately $8 billion each. However, as the standard was adopted using a modified retrospective approach, it did not impact the company's historical consolidated net income or cash flows for comparative periods.

The gross profit margin slightly decreased by 23 basis points to 30.2% in the first quarter of 2019. This was mainly due to increased distribution and transportation expenses, as well as a shift in the sales mix towards the consumables category, which generally carries a lower gross profit rate. These factors were partially offset by higher initial markups on inventory purchases.

Dollar General maintains a strong liquidity position with a $1.25 billion revolving credit facility and a commercial paper program. The company believes its cash flow from operations, existing cash balances, and available credit facilities will be sufficient to fund its obligations, working capital, capital expenditures, and dividend payments for the foreseeable future. They also continue to actively engage in share repurchases and pay quarterly dividends.