Dollar General Corporation Reports Third Quarter 2023 Results
Thu, 07 Dec 2023
Reiterates Financial Guidance for Fiscal Year 2023
Provides Fiscal Year 2024 Real Estate Growth Plan
-
Net Sales Increased 2.4% to
$9.7 Billion - Same-Store Sales Decreased 1.3%
-
Operating Profit Decreased 41.1% to
$433.5 Million -
Diluted Earnings Per Share (“EPS”) Decreased 45.9% to
$1.26 -
Year-to-Date Cash Flows From Operations of
$1.4 Billion -
Board of Directors Declares Quarterly Cash Dividend of
$0.59 Per Share
“I am excited to be back at
“While we are not satisfied with our financial results for the third quarter, including a significant headwind from inventory shrink, we are pleased with the momentum in some of the underlying sales trends, including positive customer traffic, as well as market share gains in both dollars and units. We continue to believe our model is relevant in all economic cycles, and we are working diligently to further enhance our unique combination of value and convenience.”
“With that in mind, we are pleased to announce today our real estate growth plans for fiscal year 2024, which include approximately 2,385 projects in total, including 800 new stores, 1,500 remodels, and 85 relocations. This is a modest slow down compared to the number of projects in recent years, which we believe is prudent in this environment. We are excited about the opportunities these projects provide to serve both new and existing customers, while also driving strong financial returns for the business and laying the foundation for future growth. Looking ahead, we are confident in this business model and its ability to create long-term shareholder value.”
Third Quarter 2023 Highlights
Net sales increased 2.4% to
Gross profit as a percentage of net sales was 29.0% in the third quarter of 2023 compared to 30.5% in the third quarter of 2022, a decrease of 147 basis points. This gross profit rate decrease was primarily attributable to increased shrink, lower inventory markups, and increased markdowns. These factors were partially offset by a lower LIFO provision and decreased transportation costs.
Selling, general and administrative expenses (“SG&A”) as a percentage of net sales were 24.5% in the third quarter of 2023 compared to 22.7% in the third quarter of 2022, an increase of 183 basis points. The primary expenses that were a greater percentage of net sales in the current year period were retail labor, depreciation and amortization, repairs and maintenance, rent, professional fees, and other services purchased, including debit and credit card transaction fees. These were partially offset by a decrease in incentive compensation.
Operating profit for the third quarter of 2023 decreased 41.1% to
Interest expense for the third quarter of 2023 increased 53.3% to
The effective income tax rate for the third quarter of 2023 was 21.3% compared to 22.8% in the third quarter of 2022. This lower effective income tax rate was primarily due to increased benefits from federal employment tax credits and an increased benefit from rate-impacting items, caused by lower earnings before taxes during the quarter. These benefits were partially offset by a higher state effective tax rate.
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
In the third 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
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 share repurchase expectations for 2023 can be found under “Fiscal Year 2023 Financial Guidance and Store Growth Outlook.”
Dividend
On
Fiscal Year 2023 Financial Guidance and Store Growth Outlook
The Company continues to expect:
- Net sales growth in the range of 1.5% to 2.5%, which continues to include an anticipated negative impact of approximately two percentage points due to lapping the fiscal 2022 53rd week.
- Same-store sales growth in the range of a decline of approximately 1.0% to flat.
-
Diluted EPS in the range of approximately
$7.10 to$7.60 , or a decline of 34% to 29%.- The Diluted EPS guidance continues to include an anticipated negative impact of approximately four percentage points due to lapping the fiscal 2022 53rd week.
- The Diluted EPS guidance continues to include an anticipated negative impact of approximately four percentage points due to higher interest expense in fiscal 2023.
- The Diluted EPS guidance continues to assume an effective tax rate of approximately 22.5%.
-
Capital expenditures, including those related to investments in the Company’s strategic initiatives, in the range of
$1.6 billion to$1.7 billion . -
3,110 real estate projects in
the United States , including 990 new store openings, 2,000 remodels, and 120 store relocations.
The Company’s guidance also continues to assume no share repurchases in 2023.
Fiscal Year 2024 Store Growth Outlook
For fiscal year 2024, the Company plans to execute approximately 2,385 real estate projects, including approximately 800 new store openings (including approximately 30 pOpshelf openings and approximately 15 new stores in
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, strategy, initiatives, plans, intentions or beliefs, including, but not limited to, statements made within the quotation of
- economic factors, including but not limited to employment levels; inflation (and the Company’s ability to adjust prices sufficiently to offset the effect of inflation); pandemics (such as the COVID-19 pandemic); higher fuel, energy, healthcare and housing costs; higher interest rates, consumer debt levels, and tax rates; lack of available credit; tax law changes that negatively affect credits and refunds; decreases in, or elimination of, government stimulus programs or subsidies such as unemployment and food/nutrition assistance programs and student loan repayment forgiveness; commodity rates; transportation, lease and insurance costs; wage rates (including the heightened possibility of increased federal, state and/or local minimum wage rates); foreign exchange rate fluctuations; measures or events that create barriers to or increase the costs of international trade (including increased import duties or tariffs); and changes in laws and regulations and their effect on, as applicable, customer spending and disposable income, the Company’s ability to execute its strategies and initiatives, the Company’s cost of goods sold, the Company’s SG&A expenses (including real estate costs), and the Company’s sales and profitability;
- failure to achieve or sustain the Company’s strategies, initiatives and investments, including those relating to merchandising (including non-consumable initiatives), real estate and new store development, international expansion, store formats and concepts, digital, marketing, health services, shrink, damages, sourcing, private brand, inventory management, supply chain, private fleet, store operations, expense reduction, technology, pOpshelf, Fast Track, and DG Media Network;
- competitive pressures and changes in the competitive environment and the geographic and product markets where the Company operates, including, but not limited to, pricing, promotional activity, expanded availability of mobile, web-based and other digital technologies, and alliances or other business combinations;
- failure to timely and cost-effectively execute the Company’s real estate projects or to anticipate or successfully address the challenges imposed by the Company’s expansion, including into new countries or domestic markets, states, or urban or suburban areas;
- levels of inventory shrinkage and damages;
- failure to successfully manage inventory balances, issues related to supply chain disruptions, seasonal buying pattern disruptions, and distribution network capacity;
-
failure to maintain the security of the Company’s business, customer, employee or vendor information or to comply with privacy laws, or the Company or one of its vendors falling victim to a cyberattack (which risk is heightened as a result of political uncertainty involving
China and the current conflict betweenRussia andUkraine ) that prevents the Company from operating all or a portion of its business; - damage or interruption to the Company’s information systems as a result of external factors, staffing shortages or challenges in maintaining or updating the Company’s existing technology or developing or implementing new technology;
- a significant disruption to the Company’s distribution network, the capacity of the Company’s distribution centers or the timely receipt of inventory, or delays in constructing, opening or staffing new distribution centers (including temperature-controlled distribution centers);
-
risks and challenges associated with sourcing merchandise from suppliers, including, but not limited to, those related to international trade (for example, political uncertainty involving
China and disruptive political events such as the current conflict betweenRussia andUkraine ); -
natural disasters, unusual weather conditions (whether or not caused by climate change), pandemic outbreaks or other health crises (for example, the COVID-19 pandemic), political or civil unrest, acts of war, violence or terrorism, and disruptive global political events (for example, political uncertainty involving
China and the current conflict betweenRussia andUkraine ); - product liability, product recall or other product safety or labeling claims;
- incurrence of material uninsured losses, excessive insurance costs or accident costs;
- failure to attract, develop and retain qualified employees while controlling labor costs (including the heightened possibility of increased federal, state and/or local minimum wage rates/salary levels, including the effects of potential regulatory changes related to the overtime exemption under the Fair Labor Standards Act if implemented) and other labor issues, including employee safety issues and employee expectations and productivity;
- loss of key personnel or inability to hire additional qualified personnel or inability to enforce non-compete agreements that we have in place with management personnel;
- risks associated with the Company’s private brands, including, but not limited to, the Company’s level of success in improving their gross profit rate at expected levels;
- seasonality of the Company’s business;
- failure to protect the Company’s reputation;
-
the impact of changes in or noncompliance with governmental regulations and requirements, including, but not limited to, those dealing with the sale of products, including without limitation, product and food safety, marketing, labeling or pricing; information security and privacy; labor and employment; employee wages and benefits (including the heightened possibility of increased federal, state and/or local minimum wage rates/salary levels); health and safety; imports and customs; bribery; climate change; and environmental compliance, as well as tax laws (including those related to the federal, state or foreign corporate tax rate), 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, derivative actions, multi-district litigation, arbitrations, administrative proceedings, regulatory actions or other litigation or of inquiries from federal, state and local agencies, regulatory authorities, attorneys general, committees, subcommittees and members of the
U.S. Congress , and other local, state, federal and international governmental authorities;
- new accounting guidance or changes in the interpretation or application of existing guidance;
- deterioration in market conditions, including market disruptions, adverse conditions in the financial markets including financial institution failures, limited liquidity and interest rate increases, changes in the Company’s credit profile, compliance with covenants and restrictions under the Company’s debt agreements, and the amount of the Company’s available excess capital;
- the factors disclosed under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and any subsequently filed Quarterly Reports on Form 10-Q; 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
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 AND SUBSIDIARIES | |||||||
Condensed Consolidated Balance Sheets | |||||||
(In thousands) | |||||||
(Unaudited) | |||||||
2023 |
2022 |
2023 |
|||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ |
365,447 |
$ |
362,731 |
|
$ |
381,576 |
Merchandise inventories |
|
7,356,065 |
|
7,144,722 |
|
|
6,760,733 |
Income taxes receivable |
|
197,555 |
|
188,082 |
|
|
135,775 |
Prepaid expenses and other current assets |
|
352,011 |
|
321,481 |
|
|
302,925 |
Total current assets |
|
8,271,078 |
|
8,017,016 |
|
|
7,581,009 |
Net property and equipment |
|
5,848,385 |
|
4,927,450 |
|
|
5,236,309 |
Operating lease assets |
|
10,904,323 |
|
10,469,374 |
|
|
10,670,014 |
|
4,338,589 |
|
4,338,589 |
|
|
4,338,589 |
|
Other intangible assets, net |
|
1,199,700 |
|
1,199,700 |
|
|
1,199,700 |
Other assets, net |
|
62,551 |
|
55,029 |
|
|
57,746 |
Total assets | $ |
30,624,626 |
$ |
29,007,158 |
|
$ |
29,083,367 |
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Current portion of long-term obligations | $ |
750,000 |
$ |
- |
|
$ |
- |
Current portion of operating lease liabilities |
|
1,355,316 |
|
1,257,060 |
|
|
1,288,939 |
Accounts payable |
|
3,651,778 |
|
4,127,076 |
|
|
3,552,991 |
Accrued expenses and other |
|
1,020,759 |
|
1,110,505 |
|
|
1,036,919 |
Income taxes payable |
|
9,237 |
|
8,006 |
|
|
8,919 |
Total current liabilities |
|
6,787,090 |
|
6,502,647 |
|
|
5,887,768 |
Long-term obligations |
|
6,440,845 |
|
5,985,728 |
|
|
7,009,399 |
Long-term operating lease liabilities |
|
9,540,573 |
|
9,195,042 |
|
|
9,362,761 |
Deferred income taxes |
|
1,152,125 |
|
992,479 |
|
|
1,060,906 |
Other liabilities |
|
252,109 |
|
237,456 |
|
|
220,761 |
Total liabilities |
|
24,172,742 |
|
22,913,352 |
|
|
23,541,595 |
Commitments and contingencies | |||||||
Shareholders' equity: | |||||||
Preferred stock |
|
- |
|
- |
|
|
- |
Common stock |
|
192,053 |
|
195,629 |
|
|
191,718 |
Additional paid-in capital |
|
3,732,376 |
|
3,676,077 |
|
|
3,693,871 |
Retained earnings |
|
2,527,201 |
|
2,222,823 |
|
|
1,656,140 |
Accumulated other comprehensive loss |
|
254 |
|
(723 |
) |
|
43 |
Total shareholders' equity |
|
6,451,884 |
|
6,093,806 |
|
|
5,541,772 |
Total liabilities and shareholders' equity | $ |
30,624,626 |
$ |
29,007,158 |
|
$ |
29,083,367 |
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 | |||||||
2023 |
Sales | 2022 |
Sales | |||||
Net sales | $ |
9,694,082 |
100.00 |
% |
$ |
9,464,891 |
100.00 |
% |
Cost of goods sold |
|
6,881,554 |
70.99 |
|
6,579,696 |
69.52 |
||
Gross profit |
|
2,812,528 |
29.01 |
|
2,885,195 |
30.48 |
||
Selling, general and administrative expenses |
|
2,379,054 |
24.54 |
|
2,149,650 |
22.71 |
||
Operating profit |
|
433,474 |
4.47 |
|
735,545 |
7.77 |
||
Interest expense |
|
82,289 |
0.85 |
|
53,681 |
0.57 |
||
Other (income) expense |
|
- |
0.00 |
|
415 |
0.00 |
||
Income before income taxes |
|
351,185 |
3.62 |
|
681,449 |
7.20 |
||
Income tax expense |
|
74,939 |
0.77 |
|
155,282 |
1.64 |
||
Net income | $ |
276,246 |
2.85 |
% |
$ |
526,167 |
5.56 |
% |
Earnings per share: | ||||||||
Basic | $ |
1.26 |
$ |
2.34 |
||||
Diluted | $ |
1.26 |
$ |
2.33 |
||||
Weighted average shares outstanding: | ||||||||
Basic |
|
219,480 |
|
224,527 |
||||
Diluted |
|
219,799 |
|
225,697 |
||||
For the 39 Weeks Ended | ||||||||
% of Net | % of Net | |||||||
2023 |
Sales | 2022 |
Sales | |||||
Net sales | $ |
28,833,095 |
100.00 |
% |
$ |
27,641,956 |
100.00 |
% |
Cost of goods sold |
|
20,020,407 |
69.44 |
|
18,970,175 |
68.63 |
||
Gross profit |
|
8,812,688 |
30.56 |
|
8,671,781 |
31.37 |
||
Selling, general and administrative expenses |
|
6,946,042 |
24.09 |
|
6,276,653 |
22.71 |
||
Operating profit |
|
1,866,646 |
6.47 |
|
2,395,128 |
8.66 |
||
Interest expense |
|
249,664 |
0.87 |
|
136,455 |
0.49 |
||
Other (income) expense |
|
- |
0.00 |
|
415 |
0.00 |
||
Income before income taxes |
|
1,616,982 |
5.61 |
|
2,258,258 |
8.17 |
||
Income tax expense |
|
357,521 |
1.24 |
|
501,404 |
1.81 |
||
Net income | $ |
1,259,461 |
4.37 |
% |
$ |
1,756,854 |
6.36 |
% |
Earnings per share: | ||||||||
Basic | $ |
5.74 |
$ |
7.76 |
||||
Diluted | $ |
5.73 |
$ |
7.72 |
||||
Weighted average shares outstanding: | ||||||||
Basic |
|
219,359 |
|
226,434 |
||||
Diluted |
|
219,953 |
|
227,587 |
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||
Condensed Consolidated Statements of Cash Flows | ||||||
(In thousands) | ||||||
(Unaudited) | ||||||
For the 39 Weeks Ended | ||||||
2023 |
2022 |
|||||
Cash flows from operating activities: | ||||||
Net income | $ |
1,259,461 |
|
$ |
1,756,854 |
|
Adjustments to reconcile net income to net cash from operating activities: | ||||||
Depreciation and amortization |
|
625,817 |
|
|
532,514 |
|
Deferred income taxes |
|
91,158 |
|
|
166,965 |
|
Noncash share-based compensation |
|
40,704 |
|
|
57,562 |
|
Other noncash (gains) and losses |
|
79,001 |
|
|
365,500 |
|
Change in operating assets and liabilities: | ||||||
Merchandise inventories |
|
(661,611 |
) |
|
(1,885,434 |
) |
Prepaid expenses and other current assets |
|
(50,846 |
) |
|
(81,836 |
) |
Accounts payable |
|
108,757 |
|
|
377,478 |
|
Accrued expenses and other liabilities |
|
3,802 |
|
|
54,134 |
|
Income taxes |
|
(61,462 |
) |
|
(90,737 |
) |
Other |
|
7,238 |
|
|
(4,813 |
) |
Net cash provided by (used in) operating activities |
|
1,442,019 |
|
|
1,248,187 |
|
Cash flows from investing activities: | ||||||
Purchases of property and equipment |
|
(1,240,507 |
) |
|
(1,078,208 |
) |
Proceeds from sales of property and equipment |
|
4,963 |
|
|
2,388 |
|
Net cash provided by (used in) investing activities |
|
(1,235,544 |
) |
|
(1,075,820 |
) |
Cash flows from financing activities: | ||||||
Issuance of long-term obligations |
|
1,498,260 |
|
|
2,296,053 |
|
Repayments of long-term obligations |
|
(14,362 |
) |
|
(907,731 |
) |
Net increase (decrease) in commercial paper outstanding |
|
(1,303,800 |
) |
|
456,800 |
|
Borrowings under revolving credit facilities |
|
500,000 |
|
|
- |
|
Repayments of borrowings under revolving credit facilities |
|
(500,000 |
) |
|
- |
|
Costs associated with issuance of debt |
|
(12,438 |
) |
|
(16,521 |
) |
Repurchases of common stock |
|
- |
|
|
(1,641,851 |
) |
Payments of cash dividends |
|
(388,381 |
) |
|
(372,423 |
) |
Other equity and related transactions |
|
(1,883 |
) |
|
31,208 |
|
Net cash provided by (used in) financing activities |
|
(222,604 |
) |
|
(154,465 |
) |
Net increase (decrease) in cash and cash equivalents |
|
(16,129 |
) |
|
17,902 |
|
Cash and cash equivalents, beginning of period |
|
381,576 |
|
|
344,829 |
|
Cash and cash equivalents, end of period | $ |
365,447 |
|
$ |
362,731 |
|
Supplemental cash flow information: | ||||||
Cash paid for: | ||||||
Interest | $ |
295,915 |
|
$ |
154,133 |
|
Income taxes | $ |
325,580 |
|
$ |
421,678 |
|
Supplemental schedule of non-cash investing and financing activities: | ||||||
Right of use assets obtained in exchange for new operating lease liabilities | $ |
1,248,662 |
|
$ |
1,314,045 |
|
Purchases of property and equipment awaiting processing for payment, included in Accounts payable | $ |
140,724 |
|
$ |
152,579 |
|
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES |
|||||||
Selected Additional Information |
|||||||
(Unaudited) |
|||||||
Sales by Category (in thousands) |
|||||||
For the Quarter Ended | |||||||
2023 |
2022 |
% Change | |||||
Consumables | $ |
7,940,527 |
$ |
7,664,806 |
|
3.6 |
% |
Seasonal |
|
940,632 |
|
942,831 |
|
-0.2 |
% |
Home products |
|
534,471 |
|
574,425 |
|
-7.0 |
% |
Apparel |
|
278,452 |
|
282,829 |
|
-1.5 |
% |
Net sales | $ |
9,694,082 |
$ |
9,464,891 |
|
2.4 |
% |
For the 39 Weeks Ended | |||||||
2023 |
2022 |
% Change | |||||
Consumables | $ |
23,445,031 |
$ |
22,101,146 |
|
6.1 |
% |
Seasonal |
|
2,979,474 |
|
2,991,113 |
|
-0.4 |
% |
Home products |
|
1,582,305 |
|
1,674,013 |
|
-5.5 |
% |
Apparel |
|
826,285 |
|
875,684 |
|
-5.6 |
% |
Net sales | $ |
28,833,095 |
$ |
27,641,956 |
|
4.3 |
% |
Store Activity | |||||||
For the 39 Weeks Ended | |||||||
2023 |
2022 |
||||||
Beginning store count |
|
19,104 |
|
18,130 |
|
||
New store openings |
|
690 |
|
734 |
|
||
Store closings |
|
(68 |
) |
(46 |
) |
||
Net new stores |
|
622 |
|
688 |
|
||
Ending store count |
|
19,726 |
|
18,818 |
|
||
Total selling square footage (000's) |
|
148,644 |
|
140,517 |
|
||
Growth rate (square footage) |
|
5.8 |
% |
5.8 |
% |
View source version on businesswire.com: https://www.businesswire.com/news/home/20231206545811/en/
Investor Contact:
investorrelations@dollargeneral.com
Media Contact:
dgpr@dollargeneral.com
Source: