10-QPeriod: Q3 FY2025

DOLLAR GENERAL CORP Quarterly Report for Q3 Ended Aug 2, 2024

Filed August 29, 2024For Securities:DG

Summary

Dollar General Corporation (DG) reported net sales of $10.21 billion for the thirteen weeks ended August 2, 2024, a 4.2% increase year-over-year, primarily driven by new store openings and a modest 0.5% rise in same-store sales. However, profitability was impacted, with net income decreasing by 20.2% to $374.2 million, resulting in diluted earnings per share of $1.70, down from $2.13 in the prior year period. This decline is attributed to a lower gross profit margin (down 112 basis points to 30.0%) due to increased markdowns, damages, higher shrink, and a greater sales mix towards lower-margin consumables. Additionally, Selling, General & Administrative (SG&A) expenses rose as a percentage of sales. For the twenty-six week period ended August 2, 2024, net sales increased by 5.1% to $20.12 billion, but net income saw a more significant drop of 25.0% to $737.5 million, with diluted EPS at $3.35 compared to $4.47. The company highlighted strong operating cash flow generation of $1.65 billion for the year-to-date period, an increase of 127.4%. Dollar General continues to execute its strategy of store growth, opening 213 new stores in the quarter and planning for approximately 730 new stores in fiscal 2024, while also focusing on cost management and strategic initiatives like "DG Fresh" and optimizing its store formats.

Financial Highlights

42 data points
Beta

Revenue

$10.21B

30.0% Gross Margin

Net Income

$374.19M

3.7% Net Margin

EPS (Diluted)

$1.70

Total Assets

$31.81B

Cash & Equivalents

$1.22B

Free Cash Flow

$988.92M

Financial Statements
Beta
Revenue$10.21B
Cost of Revenue$7.15B
Gross Profit$3.06B
SG&A Expenses$2.51B
Operating Income$549.96M
Net Income$374.19M
EPS (Basic)$1.70
EPS (Diluted)$1.70
Shares Outstanding (Basic)219.90M
Shares Outstanding (Diluted)220.06M

Key Highlights

  • 1Net sales increased 4.2% to $10.21 billion for the 13-week period, driven by new stores and a 0.5% same-store sales growth.
  • 2Net income for the 13-week period decreased 20.2% to $374.2 million, with diluted EPS falling to $1.70 from $2.13 year-over-year.
  • 3Gross profit margin declined by 112 basis points to 30.0% due to increased markdowns, damages, higher shrink, and a greater proportion of sales from consumables.
  • 4SG&A expenses increased as a percentage of net sales, primarily due to higher retail labor, depreciation, amortization, and store occupancy costs.
  • 5Year-to-date operating cash flow significantly increased by 127.4% to $1.65 billion.
  • 6The company opened 213 new stores in the quarter and plans for approximately 730 new store openings in fiscal 2024.
  • 7Inventory turnover remained steady at 3.9 times on a rolling four-quarter basis, and per-store inventories decreased by 11.0% year-over-year.

Frequently Asked Questions

For the thirteen weeks ended August 2, 2024, Dollar General reported net sales of $10.21 billion, a 4.2% increase compared to the same period last year. However, net income decreased by 20.2% to $374.2 million, resulting in diluted earnings per share of $1.70, down from $2.13 in the prior year. The gross profit margin declined due to higher costs and a shift in sales mix.

Merchandise inventories remained relatively flat on a per-store basis year-over-year, decreasing by 11.0% compared to August 4, 2023. Cost of goods sold increased by 5.9% for the 13-week period, outpacing the net sales growth, which contributed to the pressure on gross profit margins. Inventory turnover was 3.9 times on a rolling four-quarter basis.

Key challenges impacting profitability include increased inventory shrink and damages, higher markdowns, and a growing proportion of sales coming from the lower-margin consumables category. Additionally, Selling, General & Administrative (SG&A) expenses rose as a percentage of sales due to higher retail labor, depreciation, and occupancy costs. The company also noted that inflationary pressures continue to affect operating results.

Dollar General continues its aggressive store expansion strategy, opening 213 new stores in the quarter and planning for approximately 730 new store openings in fiscal 2024. The company is also focusing on remodeling existing stores. For capital allocation, Dollar General paid a quarterly cash dividend of $0.59 per share and stated that it did not repurchase any shares during the first half of 2024 and does not plan to do so for the remainder of the year, prioritizing maintaining its investment grade credit rating and financial flexibility.