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GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)--Jun 1, 2023--
Dollar General Corporation (NYSE: DG) today reported financial results for its fiscal 2023 first quarter (13 weeks) ended May 5, 2023.
“While the macroeconomic environment has been more challenging than expected, particularly for our core customer, we are confident in Dollar General’s ability to deliver strong growth in the years ahead, despite the near-term pressure which impacted our first quarter sales results and is anticipated to impact our full-year sales and EPS,” said Jeff Owen, Dollar General’s chief executive officer.
“We are controlling what we can control and have made significant progress improving our execution on multiple fronts, including on our supply chain recovery efforts and enhancements to the customer experience with our previously announced investment in incremental labor hours. In addition, we executed more than 800 real estate projects, including new store openings in our larger footprint Dollar General formats, which continue to outperform our expectations, and drive higher sales productivity compared to our traditional stores.”
“Looking ahead, we feel good about our position, and are taking action to better serve our core customer, which is our most important calling at Dollar General. Overall, we remain well positioned to serve all of our customers with our unique combination of value and convenience, while also creating long-term shareholder value.”
First Quarter 2023 Highlights
Net sales increased 6.8% to $9.3 billion in the first quarter of 2023 compared to $8.8 billion in the first quarter of 2022. The net sales increase was primarily driven by positive sales contributions from new stores and growth in same-store sales, partially offset by the impact of store closures. Same-store sales increased 1.6% compared to the first quarter of 2022, driven by an increase in average transaction amount, partially offset by a decrease in customer traffic. Same-store sales in the first quarter of 2023 included growth in the consumables category, partially offset by declines in each of the seasonal, home, and apparel categories.
Gross profit as a percentage of net sales was 31.6% in the first quarter of 2023 compared to 31.3% in the first quarter of 2022, an increase of 34 basis points. This gross profit rate increase was primarily attributable to higher inventory markups, decreased transportation costs, and a decreased LIFO provision; partially offset by increased shrink, markdowns, and inventory damages, as well as a greater proportion of sales coming from the consumables category, which generally has a lower gross profit rate than other product categories.
Selling, general and administrative expenses (“SG&A”) as a percentage of net sales were 23.7% in the first quarter of 2023 compared to 22.8% in the first quarter of 2022, an increase of 94 basis points. The primary expenses that were a greater percentage of net sales in the current year period were retail labor, repairs and maintenance, and depreciation and amortization; partially offset by a decrease in incentive compensation.
Operating profit for the first quarter of 2023 decreased 0.7% to $740.9 million compared to $746.2 million in the first quarter of 2022.
Interest expense for the first quarter of 2023 increased 109.3% to $83.0 million compared to $39.7 million in the first quarter of 2022, primarily driven by higher average borrowings and higher interest rates.
The effective income tax rate in both the first quarter of 2023 and the first quarter of 2022 was 21.8%. This effective income tax rate was flat due to offsetting changes driven by a lower state effective tax rate, and less benefit from stock-based compensation in the first quarter of 2023 compared to the first quarter of 2022.
The Company reported net income of $514.4 million for the first quarter of 2023, a decrease of 6.9% compared to $552.7 million in the first quarter of 2022. Diluted EPS decreased 2.9% to $2.34 for the first quarter of 2023 compared to diluted EPS of $2.41 in the first quarter of 2022.
Merchandise Inventories
As of May 5, 2023, total merchandise inventories, at cost, were $7.3 billion compared to $6.1 billion as of April 29, 2022, an increase of 14.7% on a per-store basis. This increase primarily reflects the impact of product cost inflation.
Capital Expenditures
Total additions to property and equipment in the first quarter of 2023 were $363 million, including approximately: $153 million for improvements, upgrades, remodels and relocations of existing stores; $101 million for distribution and transportation-related projects; $90 million related to store facilities, primarily for leasehold improvements, fixtures and equipment in new stores; and $8 million for information systems upgrades and technology-related projects. During the first quarter of 2023, the Company opened 212 new stores, remodeled 582 stores, and relocated 22 stores.
Share Repurchases
In the first quarter of 2023, as planned, the Company did not repurchase any shares under its share repurchase program. The total remaining authorization for future repurchases was $1.4 billion at the end of the first quarter of 2023.
Under the program, repurchases may be made from time to time in open market transactions, including pursuant to trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions. The timing, manner and number of shares repurchased will depend on a variety of factors, including price, market conditions, compliance with the covenants and restrictions under the Company’s debt agreements, cash requirements, excess debt capacity, results of operations, financial condition and other factors. The authorization has no expiration date. Information regarding the Company’s updated share repurchase expectations for 2023 can be found under “Fiscal Year 2023 Financial Guidance and Store Growth Outlook.”
Dividend
On May 30, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.59 per share on the Company’s common stock, payable on or before July 25, 2023 to shareholders of record on July 11, 2023. While the Board of Directors currently intends to continue regular cash dividends, the declaration and amount of future dividends are subject to the sole discretion of the Board and will depend upon, among other things, the Company’s results of operations, cash requirements, financial condition, contractual restrictions, excess debt capacity, and other factors the Board may deem relevant in its sole discretion.
Fiscal Year 2023 Financial Guidance and Store Growth Outlook
The macroeconomic environment is more challenging than the Company had previously anticipated, which the Company believes is having a significant impact on customers’ spending levels and behaviors.
The Company remains confident in the business and its long-term growth prospects, but is revising its outlook for fiscal year 2023, provided on March 16, 2023, to reflect these more challenging macroeconomic headwinds, and now expects:
The Company’s guidance assumes no share repurchases in 2023, as compared to its previous expectation of share repurchases of approximately $500 million.
The Company is reducing the number of expected new store openings in the pOpshelf format in 2023. As a result, the Company now expects to execute 3,110 real estate projects in the United States, including 990 new store openings, 2,000 remodels, and 120 store relocations. This is compared to the previous expectation of 3,170 real estate projects in fiscal 2023, including 1,050 new store openings, 2,000 remodels, and 120 store relocations.
Conference Call Information
The Company will hold a conference call on June 1, 2023 at 9:00 a.m. CT/10:00 a.m. ET, hosted by Jeff Owen, chief executive officer, John Garratt, president, and Kelly Dilts, chief financial officer. To participate via telephone, please call (877) 407-0890 at least 10 minutes before the conference call is scheduled to begin. The conference ID is 13738243. There will also be a live webcast of the call available at https://investor.dollargeneral.com under “News & Events, Events & Presentations.” A replay of the conference call will be available through June 29, 2023, and will be accessible via webcast replay or by calling (877) 660-6853. The conference ID for the telephonic replay is 13738243.
Forward-Looking Statements
This press release contains forward-looking information within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act. Forward-looking statements include those regarding the Company’s outlook, strategy, initiatives, plans and intentions including, but not limited to, statements made within the quotation of Mr. Owen, and in the sections entitled “Share Repurchases,” “Dividend,” and “Fiscal Year 2023 Financial Guidance and Store Growth Outlook.” A reader can identify forward-looking statements because they are not limited to historical fact or they use words such as “outlook,” “may,” “will,” “should,” “could,” “would,” “can,” “believe,” “anticipate,” “plan,” “project,” “expect,” “estimate,” “target,” “forecast,” “predict,” “position,” “assume,” “opportunities,” “intend,” “continue,” “future,” “beyond,” “ongoing,” “potential,” “long-term,” “near-term,” “guidance,” “goal,” “outcome,” “uncertainty,” “look to,” “move ahead,” “looking ahead,” “years ahead,” “subject to,” “committed,” “confident,” “focus on,” or “likely to,” and similar expressions that concern the Company’s strategies, plans, initiatives, intentions or beliefs about future occurrences or results. These matters involve risks, uncertainties and other factors that may change at any time and may cause actual results to differ materially from those which the Company expected. Many of these statements are derived from the Company’s operating budgets and forecasts as of the date of this release, which are based on many detailed assumptions that the Company believes are reasonable. However, it is very difficult to predict the effect of known factors on future results, and the Company cannot anticipate all factors that could affect future results that may be important to an investor. All forward-looking information should be evaluated in the context of these risks, uncertainties and other factors. Important factors that could cause actual results to differ materially from the expectations expressed in or implied by such forward-looking statements include, but are not limited to:
All forward-looking statements are qualified in their entirety by these and other cautionary statements that the Company makes from time to time in its SEC filings and public communications. The Company cannot assure the reader that it will realize the results or developments the Company anticipates or, even if substantially realized, that they will result in the consequences or affect the Company or its operations in the way the Company expects. Forward-looking statements speak only as of the date made. The Company undertakes no obligation, and specifically disclaims any duty, to update or revise any forward-looking statements as a result of new information, future events or circumstances, or otherwise, except as otherwise required by law. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, the Company.
Investors should also be aware that while the Company does, from time to time, communicate with securities analysts and others, it is against the Company’s policy to disclose to them any material, nonpublic information or other confidential commercial information. Accordingly, shareholders should not assume that the Company agrees with any statement or report issued by any securities analyst regardless of the content of the statement or report. Furthermore, the Company has a policy against confirming projections, forecasts or opinions issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the Company’s responsibility.
About Dollar General Corporation
Dollar General Corporation (NYSE: DG) is proud to serve as America’s neighborhood general store. Founded in 1939, Dollar General lives its mission of Serving Others every day by providing access to affordable products and services for its customers, career opportunities for its employees, and literacy and education support for its hometown communities. As of May 5, 2023, the company’s 19,294 Dollar General, DG Market, DGX and pOpshelf stores across the United States and Mi Súper Dollar General stores in Mexico provide everyday essentials including food, health and wellness products, cleaning and laundry supplies, self-care and beauty items, and seasonal décor from our high-quality private brands alongside many of the world’s most trusted brands such as Coca Cola, PepsiCo/Frito-Lay, General Mills, Hershey, J.M. Smucker, Kraft, Mars, Nestlé, Procter & Gamble and Unilever.
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||
Condensed Consolidated Balance Sheets | ||||||||||
(In thousands) | ||||||||||
(Unaudited) | ||||||||||
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| (Unaudited) |
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| May 5, |
| April 29, |
| February 3, | ||||
|
| 2023 |
| 2022 |
| 2023 | ||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 313,064 | $ | 335,613 |
| $ | 381,576 | |||
| Merchandise inventories |
| 7,335,845 |
| 6,087,399 |
|
| 6,760,733 | |||
| Income taxes receivable |
| 50,863 |
| 33,576 |
|
| 135,775 | |||
| Prepaid expenses and other current assets |
| 355,688 |
| 280,282 |
|
| 302,925 | |||
| Total current assets |
| 8,055,460 |
| 6,736,870 |
|
| 7,581,009 | |||
| Net property and equipment |
| 5,420,134 |
| 4,451,028 |
|
| 5,236,309 | |||
| Operating lease assets |
| 10,726,523 |
| 10,183,152 |
|
| 10,670,014 | |||
| Goodwill |
| 4,338,589 |
| 4,338,589 |
|
| 4,338,589 | |||
| Other intangible assets, net |
| 1,199,700 |
| 1,199,720 |
|
| 1,199,700 | |||
| Other assets, net |
| 63,527 |
| 46,949 |
|
| 57,746 | |||
| Total assets | $ | 29,803,933 | $ | 26,956,308 |
| $ | 29,083,367 | |||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Current portion of long-term obligations | $ | - | $ | 900,635 |
| $ | - | |||
| Short-term borrowings |
| 250,000 |
| - |
|
| - | |||
| Current portion of operating lease liabilities |
| 1,311,753 |
| 1,205,043 |
|
| 1,288,939 | |||
| Accounts payable |
| 3,679,170 |
| 3,906,852 |
|
| 3,552,991 | |||
| Accrued expenses and other |
| 848,757 |
| 930,260 |
|
| 1,036,919 | |||
| Income taxes payable |
| 10,999 |
| 9,051 |
|
| 8,919 | |||
| Total current liabilities |
| 6,100,679 |
| 6,951,841 |
|
| 5,887,768 | |||
| Long-term obligations |
| 7,028,767 |
| 3,947,462 |
|
| 7,009,399 | |||
| Long-term operating lease liabilities |
| 9,399,833 |
| 8,959,174 |
|
| 9,362,761 | |||
| Deferred income taxes |
| 1,111,434 |
| 907,020 |
|
| 1,060,906 | |||
| Other liabilities |
| 227,969 |
| 229,187 |
|
| 220,761 | |||
| Total liabilities |
| 23,868,682 |
| 20,994,684 |
|
| 23,541,595 | |||
| Commitments and contingencies | ||||||||||
| Shareholders' equity: | ||||||||||
| Preferred stock |
| - |
| - |
|
| - | |||
| Common stock |
| 191,921 |
| 198,623 |
|
| 191,718 | |||
| Additional paid-in capital |
| 3,701,564 |
| 3,606,414 |
|
| 3,693,871 | |||
| Retained earnings |
| 2,041,118 |
| 2,157,589 |
|
| 1,656,140 | |||
| Accumulated other comprehensive loss |
| 648 |
| (1,002 | ) |
| 43 | |||
| Total shareholders' equity |
| 5,935,251 |
| 5,961,624 |
|
| 5,541,772 | |||
| Total liabilities and shareholders' equity | $ | 29,803,933 | $ | 26,956,308 |
| $ | 29,083,367 |
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | |||||||||||
Condensed Consolidated Statements of Income | |||||||||||
(In thousands, except per share amounts) | |||||||||||
(Unaudited) | |||||||||||
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| For the Quarter Ended | ||||||||||
| May 5, |
| % of Net |
| April 29, |
| % of Net | ||||
| 2023 |
| Sales |
| 2022 |
| Sales | ||||
| Net sales | $ | 9,342,832 | 100.00 | % | $ | 8,751,352 | 100.00 | % | |||
| Cost of goods sold |
| 6,387,358 | 68.37 |
|
| 6,012,989 | 68.71 |
| |||
| Gross profit |
| 2,955,474 | 31.63 |
|
| 2,738,363 | 31.29 |
| |||
| Selling, general and administrative expenses |
| 2,214,616 | 23.70 |
|
| 1,992,206 | 22.76 |
| |||
| Operating profit |
| 740,858 | 7.93 |
|
| 746,157 | 8.53 |
| |||
| Interest expense |
| 83,038 | 0.89 |
|
| 39,676 | 0.45 |
| |||
| Income before income taxes |
| 657,820 | 7.04 |
|
| 706,481 | 8.07 |
| |||
| Income tax expense |
| 143,440 | 1.54 |
|
| 153,824 | 1.76 |
| |||
| Net income | $ | 514,380 | 5.51 | % | $ | 552,657 | 6.32 | % | |||
| Earnings per share: | |||||||||||
| Basic | $ | 2.35 | $ | 2.42 | |||||||
| Diluted | $ | 2.34 | $ | 2.41 | |||||||
| Weighted average shares outstanding: | |||||||||||
| Basic |
| 219,193 |
| 228,477 | |||||||
| Diluted |
| 220,107 |
| 229,609 |
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
(In thousands) | ||||||||
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| For the 13 Weeks Ended | ||||||
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| May 5, |
| April 29, | ||||
|
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| 2023 |
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| 2022 |
|
| Cash flows from operating activities: | ||||||||
| Net income | $ | 514,380 |
| $ | 552,657 |
| ||
| Adjustments to reconcile net income to net cash from operating activities: | ||||||||
| Depreciation and amortization |
| 201,907 |
|
| 172,563 |
| ||
| Deferred income taxes |
| 50,442 |
|
| 81,679 |
| ||
| Noncash share-based compensation |
| 25,083 |
|
| 26,945 |
| ||
| Other noncash (gains) and losses |
| 28,630 |
|
| 68,585 |
| ||
| Change in operating assets and liabilities: | ||||||||
| Merchandise inventories |
| (601,138 | ) |
| (538,921 | ) | ||
| Prepaid expenses and other current assets |
| (56,866 | ) |
| (34,482 | ) | ||
| Accounts payable |
| 116,363 |
|
| 172,110 |
| ||
| Accrued expenses and other liabilities |
| (176,804 | ) |
| (116,384 | ) | ||
| Income taxes |
| 86,992 |
|
| 64,814 |
| ||
| Other |
| 2,126 |
|
| (50 | ) | ||
| Net cash provided by (used in) operating activities |
| 191,115 |
|
| 449,516 |
| ||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment |
| (363,141 | ) |
| (281,580 | ) | ||
| Proceeds from sales of property and equipment |
| 1,539 |
|
| 736 |
| ||
| Net cash provided by (used in) investing activities |
| (361,602 | ) |
| (280,844 | ) | ||
| Cash flows from financing activities: | ||||||||
| Repayments of long-term obligations |
| (4,505 | ) |
| (3,034 | ) | ||
| Net increase (decrease) in commercial paper outstanding |
| 3,068 |
|
| 705,300 |
| ||
| Borrowings under revolving credit facilities |
| 500,000 |
|
| - |
| ||
| Repayments of borrowings under revolving credit facilities |
| (250,000 | ) |
| - |
| ||
| Repurchases of common stock |
| - |
|
| (746,773 | ) | ||
| Payments of cash dividends |
| (129,401 | ) |
| (125,262 | ) | ||
| Other equity and related transactions |
| (17,187 | ) |
| (8,119 | ) | ||
| Net cash provided by (used in) financing activities |
| 101,975 |
|
| (177,888 | ) | ||
| Net increase (decrease) in cash and cash equivalents |
| (68,512 | ) |
| (9,216 | ) | ||
| Cash and cash equivalents, beginning of period |
| 381,576 |
|
| 344,829 |
| ||
| Cash and cash equivalents, end of period | $ | 313,064 |
| $ | 335,613 |
| ||
| Supplemental cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | 145,419 |
| $ | 52,349 |
| ||
| Income taxes | $ | 5,992 |
| $ | 7,226 |
| ||
| Supplemental schedule of non-cash investing and financing activities: | ||||||||
| Right of use assets obtained in exchange for new operating lease liabilities | $ | 386,055 |
| $ | 396,628 |
| ||
| Purchases of property and equipment awaiting processing for payment, included in Accounts payable | $ | 160,510 |
| $ | 141,202 |
|
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | |||||||||
Selected Additional Information | |||||||||
(Unaudited) | |||||||||
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Sales by Category (in thousands) | |||||||||
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| For the Quarter Ended |
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| May 5, |
| April 29, |
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| 2023 |
| 2022 |
| % Change | ||||
| Consumables | $ | 7,582,882 | $ | 6,960,501 |
| 8.9 | % | ||
| Seasonal |
| 962,681 |
| 961,378 |
| 0.1 | % | ||
| Home products |
| 531,189 |
| 539,822 |
| -1.6 | % | ||
| Apparel |
| 266,080 |
| 289,651 |
| -8.1 | % | ||
| Net sales | $ | 9,342,832 | $ | 8,751,352 |
| 6.8 | % | ||
Store Activity | |||||||||
For the Quarter Ended | |||||||||
May 5, | April 29, | ||||||||
2023 | 2022 | ||||||||
| Beginning store count |
| 19,104 |
| 18,130 |
| ||||
| New store openings |
| 212 |
| 239 |
| ||||
| Store closings |
| (22 | ) | (13 | ) | ||||
| Net new stores |
| 190 |
| 226 |
| ||||
| Ending store count |
| 19,294 |
| 18,356 |
| ||||
| Total selling square footage (000's) |
| 144,696 |
| 136,466 |
| ||||
| Growth rate (square footage) |
| 6.0 | % | 5.8 | % | ||||
View source version on businesswire.com:https://www.businesswire.com/news/home/20230601005242/en/
CONTACT: Investor Contact:
Kevin Walker, (615) 855-4954Media Contacts:
Jennifer Moreau, (877) 944-3477
Crystal Luce, (615) 855-5210
KEYWORD: TENNESSEE UNITED STATES NORTH AMERICA
INDUSTRY KEYWORD: HOME GOODS OTHER RETAIL FAMILY FOOD/BEVERAGE CONSUMER DISCOUNT/VARIETY OTHER CONSUMER RETAIL
SOURCE: Dollar General Corporation
Copyright Business Wire 2023.
PUB: 06/01/2023 06:55 AM/DISC: 06/01/2023 06:54 AM
http://www.businesswire.com/news/home/20230601005242/en