Dollar General Corporation Reports 4.0% Same-Store Sales Growth for Fourth Quarter 2018
Thu, 14 Mar 2019
3.2% Same-Store Sales Growth for Fiscal Year 2018; 29th Consecutive Year of Same-Store Sales Growth
Company Provides Financial Guidance for Fiscal Year 2019
-
Fourth Quarter Net Sales Increased 8.5%; Fiscal Year
Net Sales Increased 9.2% - Fourth Quarter Same-Store Sales Increased 4.0%; Fiscal Year Same-Store Sales Increased 3.2%
-
Fourth Quarter Diluted Earnings Per Share (“EPS”) of
$1.84 ; Fiscal Year Diluted EPS of$5.97 -
Annual Cash Flows From Operations Increased 18.9% to
$2.1 Billion -
$1.3 Billion Returned to Shareholders in the Fiscal Year through Share Repurchases and Cash Dividends -
Board of Directors Declares Increased Quarterly Cash Dividend of
$0.32 Per Share; Increases Share Repurchase Program Authorization by$1.0 Billion
“2018 was a great year for
Fourth Quarter 2018 Highlights
Net sales increased 8.5% to
Gross profit as a percentage of net sales was 31.2% in the fourth quarter of 2018 compared to 32.1% in the fourth quarter of 2017. This gross profit rate decrease was primarily attributable to higher markdowns, lower initial markups on inventory purchases, an increase in the LIFO provision, a greater proportion of sales coming from the consumables category, which generally has a lower gross profit rate than other product categories, and the sales of lower margin products comprising a higher proportion of sales within the consumables category; partially offset by an improved rate of inventory shrink.
Selling, general and administrative expenses (“SG&A”) as a percentage of
net sales were 21.6% in the fourth quarter of 2018 compared to 21.9% in
the fourth quarter of 2017. This SG&A decrease as a percentage of net
sales was primarily attributable to reductions in repairs and
maintenance expenses, benefits costs and incentive compensation
expenses, and lower utilities as a percentage of net sales. SG&A for the
fourth quarter of 2018 included approximately
Operating profit for the fourth quarter of 2018 grew 2.4% to
The effective income tax rate in the fourth quarter of 2018 was an
expense of 21.2% compared to a benefit of 18.9% in the fourth quarter of
2017. The effective income tax rate for the fourth quarter of 2018 was
higher than the fourth quarter of 2017 primarily due to the federal tax
law changes contained in the Tax Cuts and Jobs Act (“TCJA”) enacted in
The Company reported net income of
Diluted EPS for the fourth quarter of 2018 includes an estimated
Fiscal Year 2018 Highlights
Fiscal year 2018 net sales increased 9.2% to
Gross profit as a percentage of net sales was 30.5% in fiscal year 2018 compared to 30.8% in fiscal year 2017. This gross profit rate decrease was primarily attributable to higher markdowns, 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 sales within the consumables category, increased transportation costs and an increased LIFO provision. These factors were partially offset by an improved rate of inventory shrink and higher initial markups on inventory purchases.
SG&A as a percentage of net sales was 22.2% in both fiscal year 2018 and
fiscal year 2017. SG&A performance in fiscal 2018 was primarily driven
by lower repairs and maintenance expenses, partially offset by higher
occupancy costs and depreciation expenses that increased at a rate
greater than the increase in net sales. Fiscal year 2018 SG&A includes
an increase in hurricane and other disaster-related expenses of
approximately
Operating profit for fiscal year 2018 grew 5.4% to
The effective income tax rate in fiscal year 2018 was 21.1% compared to 19.3% in fiscal year 2017. The effective income tax rate was higher in fiscal year 2018 primarily due to the remeasurement of the deferred tax assets and liabilities at the new lower rate in the Company’s 2017 fiscal year, partially offset by the reduction in the current federal tax rate from 33.7% in the Company’s 2017 fiscal year to 21% in the Company’s 2018 fiscal year.
The Company reported net income of
Diluted EPS for fiscal year 2018 includes an estimated
Merchandise Inventories
As of
Capital Expenditures
Total additions to property and equipment during fiscal year 2018 were
Share Repurchases
In fiscal year 2018, the Company repurchased
Dividend
On
Fiscal Year 2019 Financial Guidance and Store Growth Outlook
For the 52-week fiscal year ending
- Net sales growth of approximately 7%
- Same-store sales growth of approximately 2.5%
- Operating profit growth of approximately 4% to 6%
-
Diluted EPS in the range of
$6.30 to$6.50 ; assumes an effective tax rate range of 22.0% to 22.5% -
Share repurchases of approximately
$1.0 billion -
Capital expenditures in the range of
$775 million to$825 million , including those related to investments in the Company’s strategic initiatives
During fiscal year 2019, the Company plans to execute approximately 2,075 real estate projects, including 975 new store openings, 1,000 mature store remodels, and 100 store relocations.
“Our operating and financial plan for fiscal year 2019 is balanced
between investing in the long-term health of the business and delivering
returns to our shareholders,” said
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, as well as the 2018 diluted EPS growth rates over
2017 fourth quarter and full year adjusted diluted EPS, were not 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. 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 factors, including but not limited to employment levels; inflation; higher fuel, energy, health care and housing costs, interest rates, consumer debt levels, and tax rates; tax law changes that negatively affect credits and refunds; lack of available credit; decreases in, or elimination of, government subsidies such as unemployment and food assistance programs; commodity rates; transportation, lease and insurance costs; wage rates; foreign exchange rate fluctuations; measures 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, and the Company’s SG&A expenses (including real estate costs);
- failure to achieve or sustain the Company’s strategies and initiatives, including those relating to merchandising, real estate and new store development, store formats, digital, shrink, sourcing, private brand, inventory management, supply chain, store operations, expense reduction, and technology;
- 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 states or metro areas;
- competitive pressures and changes in the competitive environment and the geographic and product markets where the Company operates, including, but not limited to, pricing, expanded availability of mobile, web-based and other digital technologies, and consolidation;
- levels of inventory shrinkage;
- failure to successfully manage inventory balances;
- failure to maintain the security of information that the Company holds relating to proprietary business information or the Company’s customers, employees and vendors;
- a significant disruption to the Company’s distribution network, to the capacity of the Company’s distribution centers or to the timely receipt of inventory, 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;
- product liability, product recall or other product safety or labeling claims;
- the impact of changes in or noncompliance with governmental regulations and requirements (including, but not limited to, environmental compliance, product and food safety or labeling, information security and privacy, and labor and employment, employee wages, and those governing the sale of products, 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, multi-district litigation, 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 global political events;
- 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;
- failure to attract, train and retain qualified employees while controlling labor costs and other labor issues;
- loss of key personnel or inability to hire additional qualified personnel;
- risks associated with the Company’s private brands, including, but not limited to, the Company’s level of success in improving its gross profit rate;
- seasonality of the Company’s business;
- deterioration in market conditions, including market disruptions, limited liquidity and interest rate fluctuations, or changes in the Company’s credit profile;
- 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 | ||||||||||
| Consolidated Balance Sheets | ||||||||||
| (In thousands) | ||||||||||
| (Unaudited) | ||||||||||
|
|
|
|||||||||
| 2019 | 2018 | |||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 235,487 | $ | 267,441 | ||||||
| Merchandise inventories | 4,097,004 | 3,609,025 | ||||||||
| Income taxes receivable | 57,804 | 108,265 | ||||||||
| Prepaid expenses and other current assets | 272,725 | 263,121 | ||||||||
| Total current assets | 4,663,020 | 4,247,852 | ||||||||
| Net property and equipment | 2,970,806 | 2,701,282 | ||||||||
|
|
4,338,589 | 4,338,589 | ||||||||
| Other intangible assets, net | 1,200,217 | 1,200,428 | ||||||||
| Other assets, net | 31,406 | 28,760 | ||||||||
| Total assets | $ | 13,204,038 | $ | 12,516,911 | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Current portion of long-term obligations | $ | 1,950 | $ | 401,345 | ||||||
| Accounts payable | 2,385,469 | 2,009,771 | ||||||||
| Accrued expenses and other | 618,405 | 549,658 | ||||||||
| Income taxes payable | 10,033 | 4,104 | ||||||||
| Total current liabilities | 3,015,857 | 2,964,878 | ||||||||
| Long-term obligations | 2,862,740 | 2,604,613 | ||||||||
| Deferred income taxes | 609,687 | 515,702 | ||||||||
| Other liabilities | 298,361 | 305,944 | ||||||||
| Total liabilities | 6,786,645 | 6,391,137 | ||||||||
| Commitments and contingencies | ||||||||||
| Shareholders' equity: | ||||||||||
| Preferred stock | - | - | ||||||||
| Common stock | 227,072 | 235,141 | ||||||||
| Additional paid-in capital | 3,252,421 | 3,196,462 | ||||||||
| Retained earnings | 2,941,107 | 2,698,352 | ||||||||
| Accumulated other comprehensive loss | (3,207 | ) | (4,181 | ) | ||||||
| Total shareholders' equity | 6,417,393 | 6,125,774 | ||||||||
| Total liabilities and shareholders' equity | $ | 13,204,038 | $ | 12,516,911 | ||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | |||||||||||||||||
| Consolidated Statements of Income | |||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| For the Quarter Ended | |||||||||||||||||
|
|
% of Net |
|
% of Net | ||||||||||||||
| 2019 | Sales | 2018 | Sales | ||||||||||||||
| Net sales | $ | 6,649,809 | 100.00 | % | $ | 6,129,431 | 100.00 | % | |||||||||
| Cost of goods sold | 4,578,120 | 68.85 | 4,164,033 | 67.94 | |||||||||||||
| Gross profit | 2,071,689 | 31.15 | 1,965,398 | 32.06 | |||||||||||||
| Selling, general and administrative expenses | 1,433,186 | 21.55 | 1,341,952 | 21.89 | |||||||||||||
| Operating profit | 638,503 | 9.60 | 623,446 | 10.17 | |||||||||||||
| Interest expense | 25,061 | 0.38 | 24,289 | 0.40 | |||||||||||||
| Income before income taxes | 613,442 | 9.22 | 599,157 | 9.78 | |||||||||||||
| Income tax expense (benefit) | 130,201 | 1.96 | (112,998 | ) | (1.84 | ) | |||||||||||
| Net income | $ | 483,241 | 7.27 | % | $ | 712,155 | 11.62 | % | |||||||||
| Earnings per share: | |||||||||||||||||
| Basic | $ | 1.85 | $ | 2.63 | |||||||||||||
| Diluted | $ | 1.84 | $ | 2.63 | |||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 261,408 | 270,305 | |||||||||||||||
| Diluted | 262,536 | 271,218 | |||||||||||||||
| For the Year Ended | |||||||||||||||||
|
|
% of Net |
|
% of Net | ||||||||||||||
| 2019 | Sales | 2018 | Sales | ||||||||||||||
| Net sales | $ | 25,625,043 | 100.00 | % | $ | 23,470,967 | 100.00 | % | |||||||||
| Cost of goods sold | 17,821,173 | 69.55 | 16,249,608 | 69.23 | |||||||||||||
| Gross profit | 7,803,870 | 30.45 | 7,221,359 | 30.77 | |||||||||||||
| Selling, general and administrative expenses | 5,687,564 | 22.20 | 5,213,541 | 22.21 | |||||||||||||
| Operating profit | 2,116,306 | 8.26 | 2,007,818 | 8.55 | |||||||||||||
| Interest expense | 99,871 | 0.39 | 97,036 | 0.41 | |||||||||||||
| Other (income) expense | 1,019 | 0.00 | 3,502 | 0.01 | |||||||||||||
| Income before income taxes | 2,015,416 | 7.87 | 1,907,280 | 8.13 | |||||||||||||
| Income tax expense | 425,944 | 1.66 | 368,320 | 1.57 | |||||||||||||
| Net income | $ | 1,589,472 | 6.20 | % | $ | 1,538,960 | 6.56 | % | |||||||||
| Earnings per share: | |||||||||||||||||
| Basic | $ | 5.99 | $ | 5.64 | |||||||||||||
| Diluted | $ | 5.97 | $ | 5.63 | |||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 265,155 | 272,751 | |||||||||||||||
| Diluted | 266,105 | 273,362 | |||||||||||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||
| Consolidated Statements of Cash Flows | ||||||||||
| (In thousands) | ||||||||||
| (Unaudited) | ||||||||||
| For the Year Ended | ||||||||||
|
|
|
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| 2019 | 2018 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net income | $ | 1,589,472 | $ | 1,538,960 | ||||||
|
Adjustments to reconcile net income to net cash from operating activities: |
||||||||||
| Depreciation and amortization | 454,134 | 404,231 | ||||||||
| Deferred income taxes | 52,325 | (137,648 | ) | |||||||
| Loss on debt retirement | 1,019 | 3,502 | ||||||||
| Noncash share-based compensation | 40,879 | 34,323 | ||||||||
| Other noncash (gains) and losses | 41,851 | 11,088 | ||||||||
| Change in operating assets and liabilities: | ||||||||||
| Merchandise inventories | (521,342 | ) | (348,363 | ) | ||||||
| Prepaid expenses and other current assets | (12,097 | ) | (49,406 | ) | ||||||
| Accounts payable | 375,214 | 427,911 | ||||||||
| Accrued expenses and other liabilities | 65,857 | 75,647 | ||||||||
| Income taxes | 56,390 | (156,504 | ) | |||||||
| Other | (152 | ) | (1,633 | ) | ||||||
| Net cash provided by (used in) operating activities | 2,143,550 | 1,802,108 | ||||||||
| Cash flows from investing activities: | ||||||||||
| Purchases of property and equipment | (734,380 | ) | (646,456 | ) | ||||||
| Proceeds from sales of property and equipment | 2,777 | 1,428 | ||||||||
| Net cash provided by (used in) investing activities | (731,603 | ) | (645,028 | ) | ||||||
| Cash flows from financing activities: | ||||||||||
| Issuance of long-term obligations | 499,495 | 599,556 | ||||||||
| Repayments of long-term obligations | (577,321 | ) | (752,676 | ) | ||||||
| Net increase (decrease) in commercial paper outstanding | (63,300 | ) | (60,300 | ) | ||||||
| Costs associated with issuance and retirement of debt | (4,384 | ) | (9,524 | ) | ||||||
| Repurchases of common stock | (1,007,494 | ) | (579,712 | ) | ||||||
| Payments of cash dividends | (306,523 | ) | (282,931 | ) | ||||||
| Other equity and related transactions | 15,626 | 8,033 | ||||||||
| Net cash provided by (used in) financing activities | (1,443,901 | ) | (1,077,554 | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | (31,954 | ) | 79,526 | |||||||
| Cash and cash equivalents, beginning of period | 267,441 | 187,915 | ||||||||
| Cash and cash equivalents, end of period | $ | 235,487 | $ | 267,441 | ||||||
| Supplemental cash flow information: | ||||||||||
| Cash paid for: | ||||||||||
| Interest | $ | 98,012 | $ | 88,749 | ||||||
| Income taxes | $ | 313,457 | $ | 660,510 | ||||||
| Supplemental schedule of non-cash investing and financing activities: | ||||||||||
|
Purchases of property and equipment awaiting processing for payment, included in Accounts payable |
$ | 63,662 | $ | 63,178 | ||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | |||||||||||||
| Selected Additional Information | |||||||||||||
| (Unaudited) | |||||||||||||
| Sales by Category (in thousands) | |||||||||||||
| For the Quarter Ended | |||||||||||||
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| 2019 | 2018 | % Change | |||||||||||
| Consumables | $ | 5,045,796 | $ | 4,629,512 | 9.0 | % | |||||||
| Seasonal | 879,098 | 820,160 | 7.2 | % | |||||||||
| Home products | 434,427 | 393,481 | 10.4 | % | |||||||||
| Apparel | 290,488 | 286,278 | 1.5 | % | |||||||||
| Net sales | $ | 6,649,809 | $ | 6,129,431 | 8.5 | % | |||||||
| For the Year Ended | |||||||||||||
|
|
|
||||||||||||
| 2019 | 2018 | % Change | |||||||||||
| Consumables | $ | 19,865,086 | $ | 18,054,785 | 10.0 | % | |||||||
| Seasonal | 3,050,282 | 2,837,310 | 7.5 | % | |||||||||
| Home products | 1,506,054 | 1,400,618 | 7.5 | % | |||||||||
| Apparel | 1,203,621 | 1,178,254 | 2.2 | % | |||||||||
| Net sales | $ | 25,625,043 | $ | 23,470,967 | 9.2 | % | |||||||
| Store Activity | |||||||||||||
| For the Year Ended | |||||||||||||
|
|
|
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| 2019 | 2018 | ||||||||||||
| Beginning store count | 14,534 | 13,320 | |||||||||||
| New store openings | 900 | 1,315 | |||||||||||
| Store closings | (64 | ) | (101 | ) | |||||||||
| Net new stores | 836 | 1,214 | |||||||||||
| Ending store count | 15,370 | 14,534 | |||||||||||
| Total selling square footage (000's) | 113,755 | 107,821 | |||||||||||
| Growth rate (square footage) | 5.5 | % | 9.0 | % | |||||||||
| 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 | % Change | ||||||||||||
|
|
|
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| 2019 | 2018 | ||||||||||||
| Net income | $ | 483.2 | $ | 712.2 | |||||||||
|
|
- | (310.8 | ) | ||||||||||
| Net adjustments | - | (310.8 | ) | ||||||||||
| Adjusted net income | $ | 483.2 | $ | 401.4 | |||||||||
| Diluted earnings per share: | |||||||||||||
| As reported | $ | 1.84 | $ | 2.63 | -30.0 | % | |||||||
| Adjusted | $ | 1.84 | $ | 1.48 | 24.3 | % | |||||||
| Weighted average diluted shares outstanding: | 262.5 | 271.2 | |||||||||||
| For the Year Ended | |||||||||||||
|
|
|
||||||||||||
| 2019 | 2018 | % Change | |||||||||||
| Net income | $ | 1,589.5 | $ | 1,539.0 | |||||||||
|
|
- | (310.8 | ) | ||||||||||
| Net adjustments | - | (310.8 | ) | ||||||||||
| Adjusted net income | $ | 1,589.5 | $ | 1,228.2 | |||||||||
| Diluted earnings per share: | |||||||||||||
| As reported | $ | 5.97 | $ | 5.63 | 6.0 | % | |||||||
| Adjusted | $ | 5.97 | $ | 4.49 | 33.0 | % | |||||||
| Weighted average diluted shares outstanding: | 266.1 | 273.4 | |||||||||||
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