01—Abstract
Summary
Summary of the 10-Q filed June 1, 2023. Cited figures are marked; the original filing is the authoritative source.
Dollar General Corporation (DG) reported a 6.8% increase in net sales to $9.34 billiona for the first quarter of fiscal year 2023, compared to the same period last year.
This growth was primarily driven by a 1.6% increase in same-store sales and the addition of new stores. Despite the sales increase, net income declined by 6.9% to $514.4 millionb, or $2.34 per diluted share, down from $552.7 million, or $2.41 per diluted share, in the prior year. This decrease in profitability was attributed to higher selling, general, and administrative expenses, particularly in retail labor and repairs, as well as increased interest expenses due to higher borrowings and interest rates.
The company experienced a significant decrease in cash generated from operating activities, down 57.5% to $191.1 millionc, largely due to increased inventory purchases as the company continues its supply chain recovery efforts and faces product cost inflation. Dollar General maintained its dividend payment of $0.59 per share and did not repurchase any shares during the quarter, aligning with its strategy to preserve its investment-grade credit rating and financial flexibility. The company also provided an updated outlook for store growth, planning to open approximately 990 new stores in the U.S. and up to 20 stores in Mexico, alongside significant remodel and relocation plans.
02—Key points
Key Highlights
- Net sales increased by 6.8% to $9.34 billion, driven by same-store sales growth of 1.6% and new store openings.
- Diluted earnings per share decreased to $2.34 from $2.41 in the prior year's first quarter.
- Gross profit margin improved by 34 basis points to 31.6%, primarily due to higher inventory markups and decreased transportation costs, though partially offset by increased shrink and damages.
- Selling, general, and administrative (SG&A) expenses increased as a percentage of net sales by 94 basis points to 23.7%, largely due to higher retail labor and repairs/maintenance costs.
- Cash flow from operations significantly decreased by 57.5% to $191.1 million, mainly due to increased inventory purchases.
- The company declared a quarterly dividend of $0.59 per share and made no share repurchases during the quarter, focusing on financial flexibility.
- Dollar General plans to open approximately 990 new stores in the U.S. and up to 20 stores in Mexico in fiscal year 2023.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Dollar General Corp kept $0.06.
- Revenue$9.34B100.0%
- Cost of revenue−$6.39B68.4%
- Gross profit$2.96B31.6%
- Operating costs−$2.21B23.7%
- Operating income$740.9M7.9%
- Interest, other & tax−$226.5M2.4%
- Net income$514.4M5.5%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed June 1, 2023Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $9.34B$9.43B | −0.9% |
| Cost of Revenue | $6.39B$6.38B | +0.2% |
| Gross Profit | $2.96B$3.05B | −3.0% |
| SG&A Expenses | $2.21B$2.13B | +3.7% |
| Operating Income | $740.86M$913.43M | −18.9% |
| Interest Expense | $83.04M$43.10M | +92.7% |
| Net Income | $514.38M$678.03M | −24.1% |
| EPS (Basic) | $2.35$3.00 | −21.7% |
| EPS (Diluted) | $2.34$2.98 | −21.5% |
| Shares Outstanding (Basic) | 219.19M226.30M | −3.1% |
| Shares Outstanding (Diluted) | 220.11M227.46M | −3.2% |
05—Questions
Frequently Asked Questions
What was the primary driver of the decrease in net income compared to the prior year?
The primary drivers for the decrease in net income were higher selling, general, and administrative (SG&A) expenses, which increased as a percentage of net sales due to higher retail labor and repairs/maintenance costs, and increased interest expense resulting from higher average borrowings and interest rates.
How is the company managing its inventory levels and what is the impact on cash flow?
The company is actively managing its inventory, which increased by 9% compared to the prior year, reflecting supply chain recovery efforts and product cost inflation. This increase in inventory was a significant factor in the 57.5% decrease in cash generated from operating activities for the quarter.
What is Dollar General's strategy regarding share repurchases and dividends?
Dollar General made no share repurchases during the quarter and does not plan to repurchase shares in fiscal year 2023 to preserve its investment-grade credit rating and financial flexibility. The company continues to pay a quarterly cash dividend, which was $0.59 per share in the first quarter of fiscal year 2023.
What are the company's growth plans for new stores?
Dollar General plans to open approximately 990 new stores in the U.S. and up to 20 stores in Mexico during fiscal year 2023. The company also plans to remodel approximately 2,000 stores and relocate approximately 120 stores.
06—Continue