10-QPeriod: Q3 FY2021

DOLLAR GENERAL CORP Quarterly Report for Q3 Ended Oct 30, 2020

Filed December 3, 2020For Securities:DG

Summary

Dollar General Corporation reported strong financial results for the third quarter and the first nine months of fiscal year 2020, ending October 30, 2020. The company experienced significant net sales growth driven by increased same-store sales, which rose 12.2% in the third quarter and 17.5% year-to-date. This growth was primarily attributed to a higher average transaction amount, fueled by an increase in items per transaction, and a favorable shift in sales mix towards non-consumable categories. The company also saw a substantial improvement in gross profit margin, which increased by 178 basis points in the third quarter, benefiting from lower markdowns, higher initial inventory markups, and reduced inventory shrink. Net income and diluted earnings per share saw robust increases, with net income up 57.1% in the third quarter and 71.0% year-to-date. The company's balance sheet strengthened, with total assets growing to $26.15 billion from $22.83 billion in the prior year. Cash flow from operations also saw a significant increase of 103.7% year-to-date, demonstrating strong operational performance and effective working capital management. Dollar General continued its strategic growth initiatives, including new store openings and remodels, and maintained a strong focus on cost management and shareholder returns through dividends and share repurchases.

Financial Highlights

44 data points
Beta

Revenue

$8.20B

31.3% Gross Margin

Net Income

$574.26M

7.0% Net Margin

EPS (Diluted)

$2.31

Total Assets

$26.15B

Cash & Equivalents

$2.20B

Free Cash Flow

$1.65B

Financial Statements
Beta
Revenue$8.20B
Cost of Revenue$5.63B
Gross Profit$2.57B
SG&A Expenses$1.80B
Operating Income$773.13M
Interest Expense$40.30M
Net Income$574.26M
EPS (Basic)$2.32
EPS (Diluted)$2.31
Shares Outstanding (Basic)247.13M
Shares Outstanding (Diluted)249.06M

Key Highlights

  • 1Net sales increased by 17.3% to $8.20 billion in Q3 2020, with same-store sales up 12.2%. Year-to-date net sales increased 23.0% to $25.33 billion.
  • 2Gross profit margin improved significantly, rising 178 basis points to 31.3% in Q3 2020, driven by favorable markdowns, higher initial inventory markups, and a shift towards higher-margin non-consumable products.
  • 3Operating profit surged 57.3% to $773.1 million in Q3 2020.
  • 4Net income increased by 57.1% to $574.3 million in Q3 2020, resulting in diluted EPS of $2.31, up from $1.42 in the prior year period.
  • 5Cash flow from operating activities more than doubled, increasing by 103.7% to $3.38 billion for the first nine months of fiscal 2020.
  • 6The company repurchased $1.57 billion of its common stock in the first nine months of fiscal 2020.
  • 7Dollar General continued its store expansion and remodel program, planning for approximately 1,000 new stores and 1,670 remodels in fiscal year 2020.

Frequently Asked Questions

The COVID-19 pandemic had a significant positive effect on Dollar General's net sales and same-store sales. The company saw heightened demand for consumable products and an increase in non-consumable product sales. While there were incremental costs associated with safety protocols and employee bonuses, these were more than offset by the increase in net sales, leading to improved profitability.

Dollar General focuses on driving profitable sales growth through initiatives like increasing customer traffic and average transaction amounts, while enhancing margins through effective category management, private brand penetration, and distribution efficiencies. Strategic initiatives include leveraging digital tools, expanding DG Pickup, evolving non-consumables offerings (NCI), and piloting the new pOpshelf concept. The company also continues to invest in store remodels and new store openings.

Inventory is closely managed, with a 7% increase in the first nine months of fiscal 2020. The company has a strong liquidity position with $2.2 billion in cash and cash equivalents at October 30, 2020. Long-term obligations totaled $4.13 billion, primarily in the form of senior notes. The company has access to a $1.25 billion revolving credit facility and a commercial paper program, and it believes its cash flow and existing liquidity are sufficient to meet its obligations.

Dollar General continued to return capital to shareholders, repurchasing $1.57 billion of common stock and paying $268.6 million in dividends during the first nine months of fiscal 2020. The company expects to continue its share repurchase activity and pay quarterly cash dividends throughout the remainder of fiscal 2020. A significant remaining authorization for share repurchases was in place.