Dollar General Corporation Reports Third Quarter 2015 Financial Results
Thu, 03 Dec 2015
- Net Sales Increased 7.3%; Same-Store Sales Increased 2.3%
-
Diluted Earnings Per Share Increased 10% to
$0.86 ; Adjusted Diluted EPS Increased 11% to$0.88 -
Incremental
$1 Billion Share Repurchase Authorization Announced -
$1.2 Billion of Capital Returned to Shareholders Year to Date Through Combination of 13.4 Million Shares Repurchased and Dividends Paid - Company Updates 2015 Financial Guidance
(Editor’s Note: Dollar General’s fiscal 2015 third quarter ended on
“The Dollar General team executed well in a retail environment very
similar to the second quarter. Our initiatives are showing success
relative to our long-term goals as we continued to deliver profitable
sales growth coupled with disciplined cost management. We achieved 7.3
percent sales growth, 2.3 percent same-store sales growth and adjusted
diluted earnings per share growth of 11 percent,” said
“As we plan for 2016, we are adopting a zero-based budgeting process to
reinforce our commitment as a low cost operator to better serve our
consumers with the everyday low prices they know and trust at
Third Quarter Highlights
The Company reported net income of
Net sales increased 7.3 percent to
Gross profit, as a percentage of net sales, was 30.3 percent in the 2015 third quarter, an increase of 19 basis points from the 2014 third quarter. The gross profit rate increase was primarily attributable to an improved inventory shrink rate and lower transportation costs, partially offset by the Company’s sales mix.
Selling, general and administrative expense (“SG&A”), as a percentage of
net sales, was 22.0 percent in the 2015 third quarter compared to 21.8
percent in the 2014 third quarter, an increase of 18 basis points. The
SG&A increase was primarily attributable to a restructuring charge of
The effective income tax rate was 37.0 percent for the 2015 third quarter compared to a rate of 36.5 percent for the 2014 third quarter.
39-Week Period Results
For the 39-week period ended
Gross profit increased by 9.1 percent and, as a percentage of net sales, increased by 33 basis points to 30.7 percent in the 2015 39-week period compared to the comparable 2014 period. The majority of the gross profit rate increase in the 2015 period as compared to the 2014 period was due to lower transportation costs and an improved inventory shrink rate.
SG&A was 21.9 percent of net sales in the 2015 period compared to 21.7
percent in the 2014 period, an increase of 13 basis points. The 2015
period included increased severance costs, the majority of which were
related to the restructuring discussed above, as well as increases in
incentive compensation expenses and repairs and maintenance. Partially
offsetting these items was a higher volume of cash back transactions
resulting in increased convenience fees collected from customers. The
2014 results reflect expenses of
The effective income tax rate for the 2015 period was 37.6 percent compared to a rate of 37.5 percent for the 2014 period.
For the 2015 39-week period, the Company reported net income of
Merchandise Inventories
As of
Capital Expenditures
Total additions to property and equipment in the 39-week period ended
Share Repurchases
During the 2015 third quarter, the Company repurchased 3.8 million
shares of its common stock at a total cost of
On
Fiscal 2015 Financial Outlook
The Company’s revised outlook for the 2015 fiscal year anticipates net sales to increase by approximately eight percent over the 2014 fiscal year, with same-store sales expected to increase 2.5 to 2.8 percent. It is still very early in the Company’s fiscal quarter with a core customer that tends to shop closer to events.
On both an unadjusted and adjusted basis, operating profit is expected
to increase approximately eight percent over 2014 adjusted operating
profit. For the fiscal year, diluted EPS is expected to be approximately
The Company continues to expect capital expenditures to be in the range
of
Conference Call Information
The Company will hold a conference call on
Non-GAAP Disclosure
Certain financial information relating to the fiscal 2015 and 2014 periods provided in this press release and the accompanying tables has not been derived in accordance with U.S. generally accepted accounting principles (“GAAP”), including adjusted operating profit, adjusted net income and adjusted diluted earnings per share. Adjusted operating profit is defined as operating profit excluding the specifically identified expenses below. Adjusted net income is defined as net income excluding the specifically identified expenses below and related tax effects, and adjusted EPS reflects adjusted net income divided by the weighted average number of diluted shares outstanding. In addition to historical results, guidance for fiscal 2015 adjusted diluted EPS is based on comparable adjustments and does not include any expenses related to the Company’s restructuring discussed above.
The Company believes that providing comparisons to operating profit, net
income and EPS, adjusted for the items shown in the accompanying
reconciliations, provides useful information to the reader in assessing
the Company’s operating performance as these measures provide an
additional relevant comparison of the Company’s operating performance
across periods. Adjustments to operating profit in the 2015 third
quarter and 39-week period include expenses of
Reconciliations of these non-GAAP measures to the most directly comparable measures calculated in accordance with GAAP are provided in the accompanying schedules.
The non-GAAP measures discussed above are not measures of financial performance or condition, liquidity or profitability in accordance with GAAP, and should not be considered as alternatives to operating profit, net income, EPS or any other measure derived in accordance with GAAP. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of the Company’s financial results as reported under GAAP. Because not all companies use identical calculations these presentations may not be comparable to other similarly titled measures of other companies.
Forward-Looking Statements
This press release contains forward-looking information, such as the
information in the section entitled “Fiscal 2015 Financial Outlook” as
well as other statements regarding the Company’s outlook, plans and
intentions, including, but not limited to, statements made within the
quotations of
- economic conditions, including their effect on employment levels, consumer demand, disposable income, credit availability and spending patterns, inflation, commodity prices, fuel prices, interest rates, exchange rate fluctuations and the cost of goods;
- failure to successfully execute the Company’s strategies and initiatives, including those relating to merchandising, sourcing, shrink, private brand, distribution and transportation, store operations, expense reduction and real estate;
- failure to open, relocate and remodel stores profitably and on schedule, as well as failure of the Company’s new store base to achieve sales and operating levels consistent with the Company’s expectations;
- levels of inventory shrinkage;
- effective response to competitive pressures and changes in the competitive environment and the markets where the Company operates, including consolidation;
- the Company’s level of success in gaining and maintaining broad market acceptance of its private brands;
- disruptions, unanticipated or unusual expenses or operational failures in the Company’s supply chain including, without limitation, a decrease in transportation capacity for overseas shipments, increases in transportation costs (including increased fuel costs and carrier rates or driver wages), work stoppages or other labor disruptions that could impede the receipt of merchandise, or delays in constructing or opening new distribution centers;
- risks and challenges associated with sourcing merchandise from suppliers, including, but not limited to, those related to international trade;
- unfavorable publicity or consumer perception of the Company’s products, including, but not limited to, related product liability and food safety claims;
- the impact of changes in or noncompliance with governmental laws and regulations (including, but not limited to, healthcare, product safety, food safety, information security and privacy, and labor and employment laws, as well as tax laws, the interpretation of existing tax laws, or our failure to sustain our reporting positions negatively affecting the Company’s tax rate) and developments in or outcomes of private actions, class actions, administrative proceedings, regulatory actions or other litigation;
- natural disasters, unusual weather conditions, pandemic outbreaks, terrorist acts and geo-political events;
- damage or interruption to the Company’s information systems or failure of technology initiatives to deliver desired or timely results;
- ability to attract and retain qualified employees, while controlling labor costs (including healthcare costs) and other labor issues;
- the Company’s loss of key personnel, inability to hire additional qualified personnel or disruption of executive management as a result of retirements or transitions;
- failure to successfully manage inventory balances;
- seasonality of the Company’s business;
- incurrence of material uninsured losses, excessive insurance costs or accident costs;
- failure to maintain the security of information that the Company holds, whether as a result of a data security breach or otherwise;
- deterioration in market conditions, including interest rate fluctuations, or a lowering of the Company’s credit ratings;
- the Company’s debt levels and restrictions in its debt agreements;
- new accounting guidance, or changes in the interpretation or application of existing guidance, such as changes to lease accounting guidance;
-
the factors disclosed under “Risk Factors” in the Company’s most
recent Annual Report on Form 10-K and any subsequent quarterly filings
on Form 10-Q filed with the
Securities and Exchange Commission ; and - such other factors as may be discussed or identified in this press release.
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
About
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||||
| (In thousands) | ||||||||||||
| (Unaudited) | ||||||||||||
|
|
|
|
||||||||||
| 2015 | 2014 | 2015 | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 182,514 | $ | 216,155 | $ | 579,823 | ||||||
| Merchandise inventories | 3,101,908 | 2,788,996 | 2,782,521 | |||||||||
| Income taxes receivable | 11,877 | - | - | |||||||||
| Prepaid expenses and other current assets | 192,476 | 173,981 | 170,265 | |||||||||
| Total current assets | 3,488,775 | 3,179,132 | 3,532,609 | |||||||||
| Net property and equipment | 2,237,068 | 2,120,572 | 2,116,075 | |||||||||
|
|
4,338,589 | 4,338,589 | 4,338,589 | |||||||||
| Other intangible assets, net | 1,201,110 | 1,202,651 | 1,201,870 | |||||||||
| Other assets, net | 22,751 | 20,004 | 19,499 | |||||||||
| Total assets | $ | 11,288,293 | $ | 10,860,948 | $ | 11,208,642 | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Current portion of long-term obligations | $ | 1,358 | $ | 101,041 | $ | 101,158 | ||||||
| Accounts payable | 1,470,107 | 1,394,873 | 1,388,154 | |||||||||
| Accrued expenses and other | 473,528 | 442,859 | 413,760 | |||||||||
| Income taxes payable | 30,462 | 33,215 | 59,400 | |||||||||
| Deferred income taxes | 16,128 | 38,858 | 25,268 | |||||||||
| Total current liabilities | 1,991,583 | 2,010,846 | 1,987,740 | |||||||||
| Long-term obligations | 3,105,332 | 2,649,598 | 2,623,965 | |||||||||
| Deferred income taxes | 568,238 | 569,055 | 601,590 | |||||||||
| Other liabilities | 279,547 | 287,812 | 285,309 | |||||||||
| Total liabilities | 5,944,700 | 5,517,311 | 5,498,604 | |||||||||
| Commitments and contingencies | ||||||||||||
| Shareholders' equity: | ||||||||||||
| Preferred stock | - | - | - | |||||||||
| Common stock | 254,697 | 265,495 | 265,514 | |||||||||
| Additional paid-in capital | 3,095,790 | 3,038,621 | 3,048,806 | |||||||||
| Retained earnings | 1,999,119 | 2,047,674 | 2,403,045 | |||||||||
| Accumulated other comprehensive loss | (6,013 | ) | (8,153 | ) | (7,327 | ) | ||||||
| Total shareholders' equity | 5,343,593 | 5,343,637 | 5,710,038 | |||||||||
| Total liabilities and shareholders' equity | $ | 11,288,293 | $ | 10,860,948 | $ | 11,208,642 | ||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||||
| Condensed Consolidated Statements of Income | ||||||||||||
| (In thousands, except per share amounts) | ||||||||||||
| (Unaudited) | ||||||||||||
| For the Quarter (13 Weeks) Ended | ||||||||||||
|
|
% of Net |
|
% of Net | |||||||||
|
2015 |
Sales | 2014 | Sales | |||||||||
| Net sales | $ | 5,067,048 | 100.00 | % | $ | 4,724,409 | 100.00 | % | ||||
| Cost of goods sold | 3,530,086 | 69.67 | 3,300,661 | 69.86 | ||||||||
| Gross profit | 1,536,962 | 30.33 | 1,423,748 | 30.14 | ||||||||
| Selling, general and administrative expenses | 1,113,103 | 21.97 | 1,029,605 | 21.79 | ||||||||
| Operating profit | 423,859 | 8.37 | 394,143 | 8.34 | ||||||||
| Interest expense | 21,394 | 0.42 | 21,835 | 0.46 | ||||||||
| Other (income) expense | 326 | 0.01 | - | 0.00 | ||||||||
| Income before income taxes | 402,139 | 7.94 | 372,308 | 7.88 | ||||||||
| Income tax expense | 148,818 | 2.94 | 135,992 | 2.88 | ||||||||
| Net income | $ | 253,321 | 5.00 | % | $ | 236,316 | 5.00 | % | ||||
| Earnings per share: | ||||||||||||
| Basic | $ | 0.87 | $ | 0.78 | ||||||||
| Diluted | $ | 0.86 | $ | 0.78 | ||||||||
| Weighted average shares outstanding: | ||||||||||||
| Basic | 292,037 | 303,080 | ||||||||||
| Diluted | 292,904 | 304,108 | ||||||||||
| For the 39 Weeks Ended | ||||||||||||
|
|
% of Net |
|
% of Net | |||||||||
| 2015 | Sales | 2014 | Sales | |||||||||
| Net sales | $ | 15,081,624 | 100.00 | % | $ | 13,970,529 | 100.00 | % | ||||
| Cost of goods sold | 10,457,802 | 69.34 | 9,733,461 | 69.67 | ||||||||
| Gross profit | 4,623,822 | 30.66 | 4,237,068 | 30.33 | ||||||||
| Selling, general and administrative expenses | 3,295,957 | 21.85 | 3,034,691 | 21.72 | ||||||||
| Operating profit | 1,327,865 | 8.80 | 1,202,377 | 8.61 | ||||||||
| Interest expense | 63,669 | 0.42 | 66,700 | 0.48 | ||||||||
| Other (income) expense | 326 | 0.00 | - | 0.00 | ||||||||
| Income before income taxes | 1,263,870 | 8.38 | 1,135,677 | 8.13 | ||||||||
| Income tax expense | 474,965 | 3.15 | 425,703 | 3.05 | ||||||||
| Net income | $ | 788,905 | 5.23 | % | $ | 709,974 | 5.08 | % | ||||
| Earnings per share: | ||||||||||||
| Basic | $ | 2.66 | $ | 2.33 | ||||||||
| Diluted | $ | 2.65 | $ | 2.32 | ||||||||
| Weighted average shares outstanding: | ||||||||||||
| Basic | 296,307 | 305,142 | ||||||||||
| Diluted | 297,174 | 306,097 | ||||||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| For the 39 Weeks Ended | ||||||||
|
|
|
|||||||
| 2015 | 2014 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 788,905 | $ | 709,974 | ||||
|
Adjustments to reconcile net income to net cash from operating activities: |
||||||||
| Depreciation and amortization | 263,287 | 255,759 | ||||||
| Deferred income taxes | (59,026 | ) | (35,944 | ) | ||||
| Tax benefit of share-based awards | (28,569 | ) | (11,659 | ) | ||||
| Loss on debt retirement, net | 326 | - | ||||||
| Noncash share-based compensation | 28,890 | 27,698 | ||||||
| Other noncash (gains) and losses | 7,130 | 7,574 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Merchandise inventories | (317,273 | ) | (239,302 | ) | ||||
| Prepaid expenses and other current assets | (24,242 | ) | (29,479 | ) | ||||
| Accounts payable | 75,880 | 100,510 | ||||||
| Accrued expenses and other liabilities | 58,701 | 71,035 | ||||||
| Income taxes | (12,246 | ) | (14,274 | ) | ||||
| Other | (1,220 | ) | (1,345 | ) | ||||
| Net cash provided by (used in) operating activities | 780,543 | 840,547 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (386,886 | ) | (288,537 | ) | ||||
| Proceeds from sales of property and equipment | 813 | 1,588 | ||||||
| Net cash provided by (used in) investing activities | (386,073 | ) | (286,949 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Issuance of long-term obligations | 499,220 | - | ||||||
| Repayments of long-term obligations | (502,120 | ) | (51,914 | ) | ||||
| Borrowings under revolving credit facilities | 1,302,100 | 1,023,000 | ||||||
| Repayments of borrowings under revolving credit facilities | (914,100 | ) | (1,023,000 | ) | ||||
| Debt issuance costs | (7,011 | ) | - | |||||
| Repurchases of common stock | (1,009,411 | ) | (800,095 | ) | ||||
| Payments of cash dividends | (195,169 | ) | - | |||||
| Other equity and related transactions | 6,143 | (2,659 | ) | |||||
| Tax benefit of share-based awards | 28,569 | 11,659 | ||||||
| Net cash provided by (used in) financing activities | (791,779 | ) | (843,009 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | (397,309 | ) | (289,411 | ) | ||||
| Cash and cash equivalents, beginning of period | 579,823 | 505,566 | ||||||
| Cash and cash equivalents, end of period | $ | 182,514 | $ | 216,155 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | 63,125 | $ | 66,250 | ||||
| Income taxes | $ | 548,445 | $ | 486,961 | ||||
| Supplemental schedule of non-cash investing and financing activities: | ||||||||
|
Purchases of property and equipment awaiting processing for payment, included in Accounts payable |
$ | 37,659 | $ | 34,961 | ||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||
| Selected Additional Information | ||||||||||
| (Unaudited) | ||||||||||
| Sales by Category (in thousands) | ||||||||||
| For the Quarter (13 Weeks) Ended | ||||||||||
|
|
|
|||||||||
| 2015 | 2014 | % Change | ||||||||
| Consumables | $ | 3,921,663 | $ | 3,645,021 | 7.6 | % | ||||
| Seasonal | 555,862 | 524,623 | 6.0 | % | ||||||
| Home products | 317,963 | 298,878 | 6.4 | % | ||||||
| Apparel | 271,560 | 255,887 | 6.1 | % | ||||||
| Net sales | $ | 5,067,048 | $ | 4,724,409 | 7.3 | % | ||||
| For the 39 Weeks Ended | ||||||||||
|
|
|
|||||||||
| 2015 | 2014 | % Change | ||||||||
| Consumables | $ | 11,543,276 | $ | 10,666,675 | 8.2 | % | ||||
| Seasonal | 1,784,680 | 1,659,651 | 7.5 | % | ||||||
| Home products | 925,292 | 867,903 | 6.6 | % | ||||||
| Apparel | 828,376 | 776,300 | 6.7 | % | ||||||
| Net sales | $ | 15,081,624 | $ | 13,970,529 | 8.0 | % | ||||
| Store Activity | ||||||||||
| For the 39 Weeks Ended | ||||||||||
|
|
|
|||||||||
| 2015 | 2014 | |||||||||
| Beginning store count | 11,789 | 11,132 | ||||||||
| New store openings | 634 | 617 | ||||||||
| Store closings | (27 | ) | (34 | ) | ||||||
| Net new stores | 607 | 583 | ||||||||
| Ending store count | 12,396 | 11,715 | ||||||||
| Total selling square footage (000's) | 91,818 | 86,608 | ||||||||
| Growth rate (square footage) | 6.0 | % | 6.4 | % | ||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||
| Reconciliation of Non-GAAP Financial Measures | ||||||||
| Adjusted Operating Profit, Adjusted Net Income, and | ||||||||
| Adjusted Diluted Earnings Per Share | ||||||||
| (in millions, except per share amounts) | ||||||||
| For the Quarter (13 Weeks) Ended | ||||||||
|
|
|
|||||||
| 2015 | 2014 | |||||||
| Operating profit | $ | 423.9 | $ | 394.1 | ||||
| Attempted acquisition-related expenses | - | 8.2 | ||||||
| Restructuring expenses | 6.1 | - | ||||||
| Adjusted operating profit | $ | 430.0 | $ | 402.3 | ||||
| Net income | $ | 253.3 | $ | 236.3 | ||||
| Attempted acquisition-related expenses | - | 8.2 | ||||||
| Restructuring expenses | 6.1 | - | ||||||
| Debt refinancing costs | 0.3 | - | ||||||
| Income tax effect of adjustments | (2.5 | ) | (0.8 | ) | ||||
| Reversal of tax reserves created in 2009 | - | (4.7 | ) | |||||
| Net adjustments | 3.9 | 2.7 | ||||||
| Adjusted net income | $ | 257.2 | $ | 239.0 | ||||
| Diluted earnings per share: | ||||||||
| As reported | $ | 0.86 | $ | 0.78 | ||||
| Adjusted | $ | 0.88 | $ | 0.79 | ||||
| Weighted average diluted shares outstanding: | 292.9 | 304.1 | ||||||
| For the 39 Weeks Ended | ||||||||
|
|
|
|||||||
| 2015 | 2014 | |||||||
| Operating profit | $ | 1,327.9 | $ | 1,202.4 | ||||
| Attempted acquisition-related expenses | - | 8.2 | ||||||
| Restructuring expenses | 6.1 | - | ||||||
| Adjusted operating profit | $ | 1,334.0 | $ | 1,210.6 | ||||
| Net income | $ | 788.9 | $ | 710.0 | ||||
| Attempted acquisition-related expenses | - | 8.2 | ||||||
| Restructuring expenses | 6.1 | - | ||||||
| Debt refinancing costs | 0.3 | - | ||||||
| Income tax effect of adjustments | (2.5 | ) | (0.8 | ) | ||||
| Reversal of tax reserves created in 2009 | - | (4.7 | ) | |||||
| Net adjustments | 3.9 | 2.7 | ||||||
| Adjusted net income | $ | 792.8 | $ | 712.7 | ||||
| Diluted earnings per share: | ||||||||
| As reported | $ | 2.65 | $ | 2.32 | ||||
| Adjusted | $ | 2.67 | $ | 2.33 | ||||
| Weighted average diluted shares outstanding: | 297.2 | 306.1 | ||||||
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