Dollar General Corporation Reports First Quarter 2018 Financial Results; Reiterates Financial Guidance for Fiscal Year 2018
Thu, 31 May 2018
- Net Sales Increased 9.0%; Same-Store Sales Increased 2.1%
-
Diluted Earnings Per Share (“EPS”) Increased 33.3% to
$1.36 -
Cash Flows From Operations Increased 7.5% to
$549 million -
$228 Million Returned to Shareholders through Share Repurchases and Cash Dividends - Company Reiterates Fiscal Year 2018 Financial Guidance
-
Board of Directors Declares Second Quarter 2018 Cash Dividend of
$0.29 per share
“Our team delivered strong net sales growth, a solid same-store sales
increase, and gross margin expansion, while continuing to execute our
cost containment strategy,” said
First Quarter 2018 Highlights
Net sales increased 9.0% to
Gross profit as a percentage of net sales was 30.5% in the first quarter of 2018 compared to 30.3% in the first quarter of 2017, an increase of 17 basis points. The first quarter of 2018 gross profit rate increase was primarily attributable to higher initial markups on inventory purchases and an improved rate of inventory shrink. These factors were partially offset by a greater proportion of sales coming from consumables that generally have a lower gross profit rate than other product categories, sales of lower margin products comprising a higher proportion of consumables sales, and increased transportation costs.
Selling, general and administrative expenses (“SG&A”) as a percentage of net sales were 22.4% in the first quarter of 2018 compared to 21.8% in the first quarter of 2017, an increase of 60 basis points. The first quarter of 2018 SG&A increase as a percentage of net sales was primarily attributable to increased retail labor expenses, due in part to the investment in store manager compensation, and increases in occupancy costs, utilities, and property taxes on leased stores, each of which increased at a rate greater than the increase in net sales.
The effective income tax rate in the first quarter of 2018 was 21.6% compared to 37.2% in the first quarter of 2017. The effective income tax rate for the first quarter of 2018 was lower than the first quarter of 2017 primarily due to the federal tax law changes contained in the Tax Cuts and Jobs Act (“TCJA”), including the change in the federal income tax rate to 21% in the 2018 period compared to 35% in the 2017 period.
The Company reported net income of
Merchandise Inventories
As of
Capital Expenditures
Total additions to property and equipment in the first quarter of 2018
were
Share Repurchases
The Company repurchased
Dividend
On
Reiterating Fiscal Year 2018 Financial Guidance and Store Growth Outlook
For the 52-week fiscal year ending
The Company expects net sales to increase approximately 9%, with same-store sales growth estimated to be in the mid-two percent range. The Company expects the fiscal year 2018 operating margin rate to be relatively unchanged as compared to the fiscal year 2017 operating margin rate.
The Company expects fiscal year 2018 diluted EPS to be in the range of
The Company currently anticipates a cash benefit of approximately
Share repurchases for fiscal year 2018 are expected to be approximately
The Company plans to open approximately 900 new stores, remodel 1,000 stores and relocate 100 stores in fiscal year 2018.
Conference Call Information
The Company will hold a conference call on
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, plans and intentions including, but not
limited to, statements made within the quotations of
- economic conditions and other economic factors, including but not limited to employment levels, credit availability and spending patterns, inflation, commodity prices, fuel prices, interest rates, measures that create barriers to or increase the costs associated with international trade (including increased import duties or tariffs), and healthcare and housing costs, and their effect on, as applicable, consumer demand, customer traffic, customer disposable income, our ability to execute our strategic initiatives, our cost of goods sold, our SG&A expenses and real estate costs;
- failure to successfully execute the Company’s strategies and initiatives, including those relating to merchandising, marketing, real estate and new store development, digital, sourcing, shrink, private brand, inventory management, distribution and transportation, store operations, store formats, budgeting and expense reduction, and technology;
- 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;
- effective response to competitive pressures and changes in the competitive environment and the geographic and product markets where the Company operates, including, but not limited to, pricing, the creation of a more convenient customer online and in-store shopping experience, and consolidation;
- levels of inventory shrinkage;
- failure to successfully manage inventory balances;
- failure to maintain the security of information that the Company holds, whether as a result of cybersecurity attacks or otherwise;
- 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 or delivery 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;
- risks and challenges associated with the Company’s private brands, including, but not limited to, the Company’s level of success in improving its gross profit rate;
- the impact of changes in or noncompliance with governmental laws and regulations (including, but not limited to, environmental compliance, product safety or labeling, food safety, information security and privacy, and labor and employment laws, as well as tax laws, the interpretation of existing tax laws, or the Company’s failure to sustain its 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;
- incurrence of material uninsured losses, excessive insurance costs or accident costs;
- natural disasters, unusual weather conditions (whether or not caused by climate change), 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, train and retain qualified employees, while controlling labor costs and other labor issues;
- loss of key personnel, inability to hire additional qualified personnel or disruption of executive management as a result of retirements or transitions;
- seasonality of the Company’s business;
- deterioration in market conditions, including market disruptions, limited liquidity and interest rate fluctuations, or a lowering of the Company’s credit ratings;
- new accounting guidance, or changes in the interpretation or application of existing guidance, such as changes to guidance related to leases;
- the factors disclosed under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K; 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) | ||||||||||||
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|
|
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| 2018 | 2017 | 2018 | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 283,970 | $ | 205,977 | $ | 267,441 | ||||||
| Merchandise inventories | 3,594,529 | 3,300,082 | 3,609,025 | |||||||||
| Income taxes receivable | 28,637 | 10,492 | 108,265 | |||||||||
| Prepaid expenses and other current assets | 258,900 | 232,398 | 263,121 | |||||||||
| Total current assets | 4,166,036 | 3,748,949 | 4,247,852 | |||||||||
| Net property and equipment | 2,758,369 | 2,487,292 | 2,701,282 | |||||||||
|
|
4,338,589 | 4,338,589 | 4,338,589 | |||||||||
| Other intangible assets, net | 1,200,375 | 1,200,597 | 1,200,428 | |||||||||
| Other assets, net | 29,861 | 20,928 | 28,760 | |||||||||
| Total assets | $ | 12,493,230 | $ | 11,796,355 | $ | 12,516,911 | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Current portion of long-term obligations | $ | 1,889 | $ | 401,188 | $ | 401,345 | ||||||
| Accounts payable | 2,018,320 | 1,622,776 | 2,009,771 | |||||||||
| Accrued expenses and other | 495,371 | 459,105 | 549,658 | |||||||||
| Income taxes payable | 9,752 | 208,972 | 4,104 | |||||||||
| Total current liabilities | 2,525,332 | 2,692,041 | 2,964,878 | |||||||||
| Long-term obligations | 2,862,497 | 2,632,090 | 2,604,613 | |||||||||
| Deferred income taxes | 565,150 | 662,485 | 515,702 | |||||||||
| Other liabilities | 303,933 | 280,858 | 305,944 | |||||||||
| Total liabilities | 6,256,912 | 6,267,474 | 6,391,137 | |||||||||
| Commitments and contingencies | ||||||||||||
| Shareholders' equity: | ||||||||||||
| Preferred stock | - | - | - | |||||||||
| Common stock | 234,109 | 239,947 | 235,141 | |||||||||
| Additional paid-in capital | 3,210,527 | 3,157,322 | 3,196,462 | |||||||||
| Retained earnings | 2,795,620 | 2,136,401 | 2,698,352 | |||||||||
| Accumulated other comprehensive loss | (3,938 | ) | (4,789 | ) | (4,181 | ) | ||||||
| Total shareholders' equity | 6,236,318 | 5,528,881 | 6,125,774 | |||||||||
| Total liabilities and shareholders' equity | $ | 12,493,230 | $ | 11,796,355 | $ | 12,516,911 | ||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||||
| Condensed Consolidated Statements of Income | ||||||||||||
| (In thousands, except per share amounts) | ||||||||||||
| (Unaudited) | ||||||||||||
| For the Quarter Ended | ||||||||||||
|
|
% of Net |
|
% of Net | |||||||||
| 2018 | Sales | 2017 | Sales | |||||||||
| Net sales | $ | 6,114,463 | 100.00 | % | $ | 5,609,625 | 100.00 | % | ||||
| Cost of goods sold | 4,252,214 | 69.54 | 3,910,642 | 69.71 | ||||||||
| Gross profit | 1,862,249 | 30.46 | 1,698,983 | 30.29 | ||||||||
| Selling, general and administrative expenses | 1,372,065 | 22.44 | 1,225,188 | 21.84 | ||||||||
| Operating profit | 490,184 | 8.02 | 473,795 | 8.45 | ||||||||
| Interest expense | 24,773 | 0.41 | 25,004 | 0.45 | ||||||||
| Other (income) expense | - | 0.00 | 3,502 | 0.06 | ||||||||
| Income before income taxes | 465,411 | 7.61 | 445,289 | 7.94 | ||||||||
| Income tax expense (benefit) | 100,559 | 1.64 | 165,800 | 2.96 | ||||||||
| Net income | $ | 364,852 | 5.97 | % | $ | 279,489 | 4.98 | % | ||||
| Earnings per share: | ||||||||||||
| Basic | $ | 1.36 | $ | 1.02 | ||||||||
| Diluted | $ | 1.36 | $ | 1.02 | ||||||||
| Weighted average shares outstanding: | ||||||||||||
| Basic | 268,267 | 274,692 | ||||||||||
| Diluted | 269,135 | 275,215 | ||||||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| For the 13 Weeks Ended | ||||||||
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| 2018 | 2017 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 364,852 | $ | 279,489 | ||||
|
Adjustments to reconcile net income to net cash from operating activities: |
||||||||
| Depreciation and amortization | 109,335 | 98,586 | ||||||
| Deferred income taxes | 8,046 | 9,516 | ||||||
| Loss on debt retirement | - | 3,502 | ||||||
| Noncash share-based compensation | 12,406 | 8,932 | ||||||
| Other noncash (gains) and losses | 3,340 | 2,122 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Merchandise inventories | 12,356 | (42,456 | ) | |||||
| Prepaid expenses and other current assets | 3,294 | (12,342 | ) | |||||
| Accounts payable | 5,043 | 56,630 | ||||||
| Accrued expenses and other liabilities | (55,124 | ) | (39,511 | ) | ||||
| Income taxes | 85,276 | 146,137 | ||||||
| Other | (176 | ) | (143 | ) | ||||
| Net cash provided by (used in) operating activities | 548,648 | 510,462 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (164,630 | ) | (143,519 | ) | ||||
| Proceeds from sales of property and equipment | 631 | 131 | ||||||
| Net cash provided by (used in) investing activities | (163,999 | ) | (143,388 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Issuance of long-term obligations | 499,495 | 599,556 | ||||||
| Repayments of long-term obligations | (400,330 | ) | (750,275 | ) | ||||
| Net increase (decrease) in commercial paper outstanding | (237,200 | ) | (22,800 | ) | ||||
| Costs associated with issuance and retirement of debt | (4,444 | ) | (9,460 | ) | ||||
| Repurchases of common stock | (150,001 | ) | (88,755 | ) | ||||
| Payments of cash dividends | (77,657 | ) | (71,294 | ) | ||||
| Other equity and related transactions | 2,017 | (5,984 | ) | |||||
| Net cash provided by (used in) financing activities | (368,120 | ) | (349,012 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 16,529 | 18,062 | ||||||
| Cash and cash equivalents, beginning of period | 267,441 | 187,915 | ||||||
| Cash and cash equivalents, end of period | $ | 283,970 | $ | 205,977 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | 43,162 | $ | 37,917 | ||||
| Income taxes | $ | 7,274 | $ | 8,837 | ||||
| Supplemental schedule of non-cash investing and financing activities: | ||||||||
|
Purchases of property and equipment awaiting processing for payment, included in Accounts payable |
$ | 66,684 | $ | 47,464 | ||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||
| Selected Additional Information | ||||||||||
| (Unaudited) | ||||||||||
| Sales by Category (in thousands) | ||||||||||
| For the Quarter Ended | ||||||||||
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| 2018 | 2017 | % Change | ||||||||
| Consumables | $ | 4,772,388 | $ | 4,315,513 | 10.6 | % | ||||
| Seasonal | 691,031 | 662,638 | 4.3 | % | ||||||
| Home products | 354,633 | 333,150 | 6.4 | % | ||||||
| Apparel | 296,411 | 298,324 | -0.6 | % | ||||||
| Net sales | $ | 6,114,463 | $ | 5,609,625 | 9.0 | % | ||||
| Store Activity | ||||||||||
| For the Quarter Ended | ||||||||||
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| 2018 | 2017 | |||||||||
| Beginning store count | 14,534 | 13,320 | ||||||||
| New store openings | 241 | 293 | ||||||||
| Store closings | (14 | ) | (12 | ) | ||||||
| Net new stores | 227 | 281 | ||||||||
| Ending store count | 14,761 | 13,601 | ||||||||
| Total selling square footage (000's) | 109,415 | 101,065 | ||||||||
| Growth rate (square footage) | 8.3 | % | 7.2 | % | ||||||
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