Dollar General Corporation Reports Fourth Quarter and Fiscal Year 2017 Financial Results; Company Provides Financial Guidance for Fiscal Year 2018
Thu, 15 Mar 2018
- Fourth Quarter Same-Store Sales Increased 3.3%; Fiscal Year Same-Store Sales Increased 2.7%
-
Fourth Quarter Diluted Earnings Per Share (“EPS”) Increased 76.5% to
$2.63 ; Fiscal Year Diluted EPS Increased 27.1% to$5.63 -
Delivered Fourth Quarter Adjusted Diluted EPS of
$1.48 ; Fiscal Year Adjusted Diluted EPS of$4.49 2 -
Cash Flows From Operations for the Fiscal Year Increased 12.3% to
$1.8 Billion -
$863 Million of Capital Returned to Shareholders in the Fiscal Year through Share Repurchases and the Payment of Cash Dividends - Opened a Company Record 1,315 New Stores, Executed 2,079 Total Real Estate Projects in the Fiscal Year
-
Company Provides Fiscal Year 2018 Financial Guidance, Including
Diluted EPS Outlook of
$5.95 to$6.15 -
Board of Directors Declares Increased Quarterly Cash Dividend of
$0.29 Per Share; Increases Share Repurchase Program Authorization by$1.0 Billion
1 As previously disclosed, Dollar General’s fiscal year 2016 and 2016 fourth quarter results contained an additional, non-comparable week, or the "2016 53rd week”, when compared to fiscal year 2017 and 2017 fourth quarter results, which included 52 weeks and 13 weeks, respectively, and fiscal year 2018 guidance which includes 52 weeks. By definition, the Company's same-store sales growth calculations do not include the non-comparable 53rd week in the 2016 periods.
2 See Reconciliation of Non-GAAP Financial Measures for reconciliation of Adjusted Diluted EPS to Diluted EPS; see also “Non-GAAP Disclosure” herein.
“I am pleased with our overall fourth quarter performance, as we
delivered strong same-store sales growth of 3.3%, while achieving a
healthy rate of gross margin expansion. For the year, we opened a record
1,315 new stores and delivered a same-store sales increase of 2.7%,
marking our 28th consecutive year of positive same-store sales growth.
At the same time, we proactively made significant investments in the
business that we expect will contribute to sustainable sales and profit
growth in the years ahead. As we move into 2018, we continue to build
momentum behind initiatives that we believe will further enhance our
strong value and convenience proposition with consumers and drive
long-term success,” said
Fourth Quarter 2017 Highlights
Net sales increased 2.0% to
The Company’s gross profit as a percentage of net sales was 32.1% in the 2017 fourth quarter compared to 31.6% in the 2016 fourth quarter, an increase of 43 basis points. The 2017 fourth quarter gross profit rate increase was primarily attributable to higher initial inventory markups, an improved rate of inventory shrink, and a reduction in markdowns; partially offset by a greater proportion of sales of consumables, which 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 was 21.9% in the 2017 fourth quarter, compared to 20.3% in the
2016 fourth quarter, an increase of 159 basis points. The 2017 fourth
quarter SG&A increase as a percentage of net sales was primarily
attributable to increased occupancy costs, increased retail labor
expenses, including the Company’s investment in store manager
compensation, and increased incentive compensation, each of which
increased at a rate greater than the increase in net sales. Partially
offsetting these increased expenses was a reduction in advertising
costs. The 2016 fourth quarter SG&A as a percentage of net sales was
favorably impacted by net sales of
Additionally, as a result of a strategic review of its real estate
portfolio, the Company closed an incremental 35 stores during the 2017
fourth quarter (the “Incremental Store Closures”) resulting in
approximately
The effective income tax rate in the 2017 fourth quarter was a benefit
of 18.9% compared to expense of 36.8% in the 2016 fourth quarter. The
effective income tax rate for the 2017 fourth quarter was lower than the
2016 quarter due primarily to the effect of the
The Company reported net income of
Diluted EPS and Adjusted EPS for the 2017 fourth quarter also include an
approximate
Fiscal Year 2017 Financial Results
Fiscal year 2017 net sales increased 6.8% to
The Company’s gross profit rate as a percentage of net sales was 30.8% in fiscal year 2017 compared to 30.8% in fiscal year 2016, a decrease of eight basis points. The gross profit rate decrease was primarily due to a greater proportion of sales of consumables, which generally have a lower gross profit rate than other product categories, sales of lower margin products comprising a higher proportion of consumables sales, higher markdowns, which were primarily for promotional activities, and increased transportation costs. These factors were partially offset by higher initial inventory markups and an improved rate of inventory shrink.
SG&A as a percentage of sales was 22.2% in fiscal year 2017 compared to
21.5% in fiscal year 2016, an increase of 75 basis points. The 2017
fiscal year SG&A increase as a percentage of sales was primarily
attributable to increased retail labor expenses, including the Company’s
investment in store manager compensation, increased occupancy costs, and
higher incentive compensation, each of which increased at a rate greater
than the increase in net sales. Partially offsetting these increased
expenses were reduced advertising costs, and costs that increased at a
rate less than the increase in net sales, including utilities and waste
management costs primarily resulting from the Company’s recycling
efforts. Fiscal year 2017 SG&A also include approximately
The effective income tax rate was an expense of 19.3% for fiscal year 2017 compared to an expense of 36.3% for fiscal year 2016. The effective income tax rate was lower in fiscal year 2017 primarily due to the effect of the TCJA, as detailed above. The TCJA had the effect of reducing the Company’s fiscal year 2017 effective tax rate primarily as a result of the remeasurement of deferred tax assets and liabilities at the new lower federal corporate rate, accompanied by benefits associated with a reduced federal corporate tax rate for fiscal year 2017 of 33.7%, as a result of the Company’s 2017 fiscal year straddling the effective date of the TCJA.
The Company reported net income of
Merchandise Inventories
As of
Capital Expenditures
Total additions to property and equipment during fiscal year 2017 were
Share Repurchases
The Company repurchased
Dividend
On
Fiscal Year 2018 Financial Guidance and Store Growth Outlook
For the 52-week fiscal year ending
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.
Long-Term Growth Model
The Company expects to continue to use the long-term growth model, which
was announced on
Conference Call Information
The Company will hold a conference call on
Non-GAAP Disclosure
Adjusted net income and adjusted diluted EPS for the 2017 fourth quarter
and fiscal year 2017 have not been derived in accordance with
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 net income, diluted 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 in accordance with 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 within the
meaning of the federal securities laws, including the Private Securities
Litigation Reform Act, including statements 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 and intra-company transfers;
- 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 | ||||||||
| Consolidated Balance Sheets | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
|
|
|
|||||||
| 2018 | 2017 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 267,441 | $ | 187,915 | ||||
| Merchandise inventories | 3,609,025 | 3,258,785 | ||||||
| Income taxes receivable | 108,265 | 11,050 | ||||||
| Prepaid expenses and other current assets | 263,121 | 220,021 | ||||||
| Total current assets | 4,247,852 | 3,677,771 | ||||||
| Net property and equipment | 2,701,282 | 2,434,456 | ||||||
|
|
4,338,589 | 4,338,589 | ||||||
| Other intangible assets, net | 1,200,428 | 1,200,659 | ||||||
| Other assets, net | 28,760 | 20,823 | ||||||
| Total assets | $ | 12,516,911 | $ | 11,672,298 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term obligations | $ | 401,345 | $ | 500,950 | ||||
| Accounts payable | 2,009,771 | 1,557,596 | ||||||
| Accrued expenses and other | 549,658 | 500,866 | ||||||
| Income taxes payable | 4,104 | 63,393 | ||||||
| Total current liabilities | 2,964,878 | 2,622,805 | ||||||
| Long-term obligations | 2,604,613 | 2,710,576 | ||||||
| Deferred income taxes | 515,702 | 652,841 | ||||||
| Other liabilities | 305,944 | 279,782 | ||||||
| Total liabilities | 6,391,137 | 6,266,004 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders' equity: | ||||||||
| Preferred stock | - | - | ||||||
| Common stock | 235,141 | 240,811 | ||||||
| Additional paid-in capital | 3,196,462 | 3,154,606 | ||||||
| Retained earnings | 2,698,352 | 2,015,867 | ||||||
| Accumulated other comprehensive loss | (4,181 | ) | (4,990 | ) | ||||
| Total shareholders' equity | 6,125,774 | 5,406,294 | ||||||
| Total liabilities and shareholders' equity | $ | 12,516,911 | $ | 11,672,298 | ||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | |||||||||||||
| Consolidated Statements of Income | |||||||||||||
| (In thousands, except per share amounts) | |||||||||||||
| (Unaudited) | |||||||||||||
| For the Quarter Ended | |||||||||||||
| (13 Weeks) | (14 Weeks) | ||||||||||||
|
|
% of Net |
|
% of Net | ||||||||||
| 2018 | Sales | 2017 | Sales | ||||||||||
| Net sales | $ | 6,129,431 | 100.00 | % | $ | 6,009,246 | 100.00 | % | |||||
| Cost of goods sold | 4,164,033 | 67.94 | 4,108,499 | 68.37 | |||||||||
| Gross profit | 1,965,398 | 32.06 | 1,900,747 | 31.63 | |||||||||
| Selling, general and administrative expenses | 1,341,952 | 21.89 | 1,220,129 | 20.30 | |||||||||
| Operating profit | 623,446 | 10.17 | 680,618 | 11.33 | |||||||||
| Interest expense | 24,289 | 0.40 | 25,511 | 0.42 | |||||||||
| Income before income taxes | 599,157 | 9.78 | 655,107 | 10.90 | |||||||||
| Income tax expense (benefit) | (112,998 | ) | (1.84 | ) | 240,931 | 4.01 | |||||||
| Net income | $ | 712,155 | 11.62 | % | $ | 414,176 | 6.89 | % | |||||
| Earnings per share: | |||||||||||||
| Basic | $ | 2.63 | $ | 1.50 | |||||||||
| Diluted | $ | 2.63 | $ | 1.49 | |||||||||
| Weighted average shares outstanding: | |||||||||||||
| Basic | 270,305 | 276,204 | |||||||||||
| Diluted | 271,218 | 277,059 | |||||||||||
| For the Year Ended | |||||||||||||
| (52 Weeks) | (53 Weeks) | ||||||||||||
|
|
% of Net |
|
% of Net | ||||||||||
| 2018 | Sales | 2017 | Sales | ||||||||||
| Net sales | $ | 23,470,967 | 100.00 | % | $ | 21,986,598 | 100.00 | % | |||||
| Cost of goods sold | 16,249,608 | 69.23 | 15,203,960 | 69.15 | |||||||||
| Gross profit | 7,221,359 | 30.77 | 6,782,638 | 30.85 | |||||||||
| Selling, general and administrative expenses | 5,213,541 | 22.21 | 4,719,189 | 21.46 | |||||||||
| Operating profit | 2,007,818 | 8.55 | 2,063,449 | 9.39 | |||||||||
| Interest expense | 97,036 | 0.41 | 97,821 | 0.44 | |||||||||
| Other (income) expense | 3,502 | 0.01 | - | 0.00 | |||||||||
| Income before income taxes | 1,907,280 | 8.13 | 1,965,628 | 8.94 | |||||||||
| Income tax expense | 368,320 | 1.57 | 714,495 | 3.25 | |||||||||
| Net income | $ | 1,538,960 | 6.56 | % | $ | 1,251,133 | 5.69 | % | |||||
| Earnings per share: | |||||||||||||
| Basic | $ | 5.64 | $ | 4.45 | |||||||||
| Diluted | $ | 5.63 | $ | 4.43 | |||||||||
| Weighted average shares outstanding: | |||||||||||||
| Basic | 272,751 | 281,317 | |||||||||||
| Diluted | 273,362 | 282,261 | |||||||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| For the Year Ended | ||||||||
| (52 Weeks) | (53 Weeks) | |||||||
|
|
|
|||||||
| 2018 | 2017 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 1,538,960 | $ | 1,251,133 | ||||
|
Adjustments to reconcile net income to net cash from operating activities: |
||||||||
| Depreciation and amortization | 404,231 | 379,931 | ||||||
| Deferred income taxes | (137,648 | ) | 12,359 | |||||
| Loss on debt retirement | 3,502 | - | ||||||
| Noncash share-based compensation | 34,323 | 36,967 | ||||||
| Other noncash (gains) and losses | 11,088 | (3,625 | ) | |||||
| Change in operating assets and liabilities: | ||||||||
| Merchandise inventories | (348,363 | ) | (171,908 | ) | ||||
| Prepaid expenses and other current assets | (49,406 | ) | (25,046 | ) | ||||
| Accounts payable | 427,911 | 56,477 | ||||||
| Accrued expenses and other liabilities | 75,647 | 42,937 | ||||||
| Income taxes | (156,504 | ) | 26,316 | |||||
| Other | (1,633 | ) | (500 | ) | ||||
| Net cash provided by (used in) operating activities | 1,802,108 | 1,605,041 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (646,456 | ) | (560,296 | ) | ||||
| Proceeds from sales of property and equipment | 1,428 | 9,360 | ||||||
| Net cash provided by (used in) investing activities | (645,028 | ) | (550,936 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Issuance of long-term obligations | 599,556 | - | ||||||
| Repayments of long-term obligations | (752,676 | ) | (3,138 | ) | ||||
| Net increase (decrease) in commercial paper outstanding | (60,300 | ) | 490,500 | |||||
| Borrowings under revolving credit facilities | - | 1,584,000 | ||||||
| Repayments of borrowings under revolving credit facilities | - | (1,835,000 | ) | |||||
| Costs associated with issuance and retirement of debt | (9,524 | ) | - | |||||
| Repurchases of common stock | (579,712 | ) | (990,474 | ) | ||||
| Payments of cash dividends | (282,931 | ) | (281,135 | ) | ||||
| Other equity and related transactions | 8,033 | 11,110 | ||||||
| Net cash provided by (used in) financing activities | (1,077,554 | ) | (1,024,137 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 79,526 | 29,968 | ||||||
| Cash and cash equivalents, beginning of period | 187,915 | 157,947 | ||||||
| Cash and cash equivalents, end of period | $ | 267,441 | $ | 187,915 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | 88,749 | $ | 92,952 | ||||
| Income taxes | $ | 660,510 | $ | 679,633 | ||||
| Supplemental schedule of non-cash investing and financing activities: | ||||||||
|
Purchases of property and equipment awaiting processing for payment, included in Accounts payable |
$ | 63,178 | $ | 38,914 | ||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||
| Selected Additional Information | ||||||||||
| (Unaudited) | ||||||||||
| Sales by Category (in thousands) | ||||||||||
| For the Quarter Ended | ||||||||||
| (13 Weeks) | (14 Weeks) | |||||||||
|
|
|
|||||||||
| 2018 | 2017 | % Change | ||||||||
| Consumables | $ | 4,629,512 | $ | 4,505,486 | 2.8 | % | ||||
| Seasonal | 820,160 | 800,604 | 2.4 | % | ||||||
| Home products | 393,481 | 405,236 | -2.9 | % | ||||||
| Apparel | 286,278 | 297,920 | -3.9 | % | ||||||
| Net sales | $ | 6,129,431 | $ | 6,009,246 | 2.0 | % | ||||
| For the Year Ended | ||||||||||
| (52 Weeks) | (53 Weeks) | |||||||||
|
|
|
|||||||||
| 2018 | 2017 | % Change | ||||||||
| Consumables | $ | 18,054,785 | $ | 16,798,881 | 7.5 | % | ||||
| Seasonal | 2,837,310 | 2,674,319 | 6.1 | % | ||||||
| Home products | 1,400,618 | 1,373,397 | 2.0 | % | ||||||
| Apparel | 1,178,254 | 1,140,001 | 3.4 | % | ||||||
| Net sales | $ | 23,470,967 | $ | 21,986,598 | 6.8 | % | ||||
| Store Activity | ||||||||||
| For the Year Ended | ||||||||||
| (52 Weeks) | (53 Weeks) | |||||||||
|
|
|
|||||||||
| 2018 | 2017 | |||||||||
| Beginning store count | 13,320 | 12,483 | ||||||||
| New store openings | 1,315 | 900 | ||||||||
| Store closings | (101 | ) | (63 | ) | ||||||
| Net new stores | 1,214 | 837 | ||||||||
| Ending store count | 14,534 | 13,320 | ||||||||
| Total selling square footage (000's) | 107,821 | 98,943 | ||||||||
| Growth rate (square footage) | 9.0 | % | 7.0 | % | ||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | |||||||
| Reconciliation of Non-GAAP Financial Measures | |||||||
| Adjusted Net Income and Adjusted Diluted Earnings Per Share | |||||||
| (Unaudited) | |||||||
| (in millions, except per share amounts) | |||||||
| For the Quarter Ended | |||||||
| (13 Weeks) | (14 Weeks) | ||||||
|
|
|
||||||
| 2018 | 2017 | ||||||
| Net income | $ | 712.2 | $ | 414.2 | |||
|
|
(310.8 | ) | - | ||||
| Net adjustments | (310.8 | ) | - | ||||
| Adjusted net income | $ | 401.4 | $ | 414.2 | |||
| Diluted earnings per share: | |||||||
| As reported | $ | 2.63 | $ | 1.49 | |||
| Adjusted | $ | 1.48 | $ | 1.49 | |||
| Weighted average diluted shares outstanding: | 271.2 | 277.1 | |||||
| For the Year Ended | |||||||
| (52 Weeks) | (53 Weeks) | ||||||
|
|
|
||||||
| 2018 | 2017 | ||||||
| Net income | $ | 1,539.0 | $ | 1,251.1 | |||
|
|
(310.8 | ) | - | ||||
| Net adjustments | (310.8 | ) | - | ||||
| Adjusted net income | $ | 1,228.2 | $ | 1,251.1 | |||
| Diluted earnings per share: | |||||||
| As reported | $ | 5.63 | $ | 4.43 | |||
| Adjusted | $ | 4.49 | $ | 4.43 | |||
| Weighted average diluted shares outstanding: | 273.4 | 282.3 | |||||
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