10-QPeriod: Q3 FY2023

DOLLAR GENERAL CORP Quarterly Report for Q3 Ended Oct 28, 2022

Filed December 1, 2022For Securities:DG

Summary

Dollar General Corporation (DG) reported solid performance for the third quarter of fiscal year 2022, ending October 28, 2022. Net sales saw a notable increase of 11.1% year-over-year, reaching $9.47 billion, driven by a 6.8% rise in same-store sales and contributions from new store openings. Diluted earnings per share also showed improvement, increasing to $2.33 from $2.08 in the prior year's comparable period. The company continues to navigate inflationary pressures and supply chain challenges, which impacted gross profit margins due to a higher LIFO provision and increased distribution costs. Despite these headwinds, Dollar General demonstrated effective cost management, with Selling, General & Administrative (SG&A) expenses decreasing as a percentage of net sales. The company also maintained a strong commitment to shareholder returns through share repurchases and dividend payments, signaling confidence in its financial position and future outlook.

Financial Highlights

45 data points
Beta

Revenue

$9.46B

30.5% Gross Margin

Net Income

$526.17M

5.6% Net Margin

EPS (Diluted)

$2.33

Total Assets

$29.01B

Cash & Equivalents

$362.73M

Free Cash Flow

$300.17M

Financial Statements
Beta
Revenue$9.46B
Cost of Revenue$6.58B
Gross Profit$2.89B
SG&A Expenses$2.15B
Operating Income$735.54M
Interest Expense$53.68M
Net Income$526.17M
EPS (Basic)$2.34
EPS (Diluted)$2.33
Shares Outstanding (Basic)224.53M
Shares Outstanding (Diluted)225.70M

Key Highlights

  • 1Net sales increased by 11.1% to $9.47 billion, driven by a 6.8% increase in same-store sales and new store growth.
  • 2Diluted earnings per share rose to $2.33 from $2.08 in the prior year's quarter.
  • 3Gross profit margin slightly decreased to 30.5% from 30.8%, primarily due to a higher LIFO provision and increased distribution costs.
  • 4SG&A expenses, as a percentage of net sales, decreased by 23 basis points to 22.7%, reflecting improved operational efficiencies.
  • 5Operating profit increased by 10.5% to $735.5 million.
  • 6The company repurchased approximately $1.6 billion of common stock during the first 39 weeks of fiscal 2022.
  • 7Dollar General continues to expand its store footprint, with plans to open approximately 1,025 new stores in fiscal 2022.

Frequently Asked Questions

Dollar General is experiencing inflationary pressures, which are contributing to higher product costs, transportation costs, and increased average item retail prices. While this has helped drive an increase in average transaction amounts, it also contributed to a higher LIFO provision and impacted gross profit margins. The company is focused on managing these costs through various initiatives.

Inventories increased by 28.4% year-over-year on a per store basis. This increase is attributed to product cost inflation, a greater mix of higher-value products, and the ongoing rollout of initiatives like the non-consumables offering and earlier receipt of seasonal goods. The company is actively managing its inventory levels, which is a key focus area impacting cash flows.

Dollar General plans to open approximately 1,025 new stores in fiscal 2022, remodel about 1,795 stores, and relocate approximately 125 stores. They are also expanding formats like pOpshelf and implementing initiatives such as 'DG Fresh' and 'Fast Track' to enhance efficiency and customer experience. Expansion into Mexico is also planned.

While some improvements in the global supply chain have been observed, Dollar General is experiencing temporary warehouse capacity constraints and inefficiencies within its internal supply chain, leading to delays and higher costs. These pressures are expected to continue impacting results but the company is investing in additional warehouse capacity to mitigate these issues.