10-QPeriod: Q3 FY2020

DOLLAR GENERAL CORP Quarterly Report for Q3 Ended Aug 2, 2019

Filed August 29, 2019For Securities:DG

Summary

Dollar General Corporation (DG) reported a solid financial performance for the second quarter and the first half of fiscal year 2019, ending August 2, 2019. The company demonstrated consistent sales growth, with net sales increasing by 8.4% to $6.98 billion in the quarter and 8.3% to $13.60 billion in the first half, driven by a 4.0% same-store sales increase in the quarter. This growth was attributed to both an increase in average transaction amount and customer traffic, indicating effective strategies in attracting and retaining customers. The company also saw an improvement in gross profit margin, which rose by 13 basis points to 30.8% in the quarter, primarily due to lower markdowns and higher initial markups, despite challenges from a shift towards lower-margin consumables. Financially, Dollar General maintained healthy operating profit and net income, with diluted EPS growing to $1.65 in the quarter and $3.13 in the first half, up from $1.52 and $2.88 in the prior year periods, respectively. The company also generated strong operating cash flow of $1.13 billion for the first half of the year. Management remains committed to strategic growth initiatives, including store expansion, remodels, and supply chain improvements like the "DG Fresh" initiative. Capital allocation remains a focus, with ongoing share repurchases and dividend payments, underscoring a commitment to shareholder returns.

Financial Highlights

44 data points
Beta

Revenue

$6.98B

30.8% Gross Margin

Net Income

$426.56M

6.1% Net Margin

EPS (Diluted)

$1.65

Total Assets

$21.92B

Cash & Equivalents

$259.57M

Free Cash Flow

$556.33M

Financial Statements
Beta
Revenue$6.98B
Cost of Revenue$4.83B
Gross Profit$2.15B
SG&A Expenses$1.57B
Operating Income$577.77M
Interest Expense$24.81M
Net Income$426.56M
EPS (Basic)$1.65
EPS (Diluted)$1.65
Shares Outstanding (Basic)257.79M
Shares Outstanding (Diluted)259.10M

Key Highlights

  • 1Net sales increased by 8.4% to $6.98 billion in the second quarter and 8.3% to $13.60 billion in the first half of fiscal year 2019.
  • 2Same-store sales grew by 4.0% in the second quarter, driven by increases in both average transaction amount and customer traffic.
  • 3Gross profit margin improved by 13 basis points to 30.8% in the second quarter, attributed to lower markdowns and higher initial markups.
  • 4Diluted Earnings Per Share (EPS) rose to $1.65 in the second quarter and $3.13 in the first half, compared to $1.52 and $2.88 in the prior year periods.
  • 5Operating cash flow for the first half of the year was $1.13 billion, a 3.0% increase year-over-year.
  • 6The company continued its strategic expansion and remodel plans, opening 489 new stores and remodeling/relocating 699 stores in the first half of fiscal year 2019.
  • 7Dollar General repurchased approximately $385 million of its common stock and paid $165.1 million in cash dividends during the first half of fiscal year 2019.

Frequently Asked Questions

Dollar General's sales growth in the second quarter was driven by a 4.0% increase in same-store sales. This growth was a result of both an increase in the average transaction amount, influenced by higher average item retail prices, and an increase in customer traffic. Sales from new store openings also contributed positively, partially offset by sales from closed stores.

Gross profit margin improved by 13 basis points to 30.8% in the second quarter of fiscal year 2019, compared to the same period in the prior year. This improvement was primarily due to a reduction in markdowns as a percentage of net sales and higher initial markups on inventory purchases. However, these benefits were partially offset by factors such as higher shrink, increased distribution costs, and a greater proportion of sales from the lower-margin consumables category.

Dollar General remains committed to its long-term operating priorities, including driving profitable sales growth and capturing growth opportunities. For fiscal year 2019, the company plans to open approximately 975 new stores, remodel approximately 1,000 stores, and relocate approximately 100 stores. Strategic initiatives such as 'DG Fresh' for fresh and frozen products and the 'Fast Track' program for store operations are also underway to enhance performance and customer convenience.

The company generated strong operating cash flow of $1.13 billion in the first half of fiscal year 2019. Dollar General continues to return capital to shareholders through share repurchases and cash dividends. During the first half of fiscal year 2019, the company repurchased approximately $385 million of its common stock and paid $165.1 million in cash dividends. A significant authorization for future share repurchases remained available at the end of the reporting period.