Dollar General Reports First Quarter 2014 Financial Results
Tue, 03 Jun 2014
- Net Sales Increased 6.8%; Same-Store Sales Increased 1.5%
-
Diluted Earnings Per Share of
$0.72 -
Distributed
$800 Million through 14.1 Million Shares Repurchased in the Quarter - Sales Trends Gaining Momentum
- Company Confirms Full Year Sales and EPS Guidance
“Dollar General’s first quarter same-store sales improvement of 1.5
percent was driven by growth in our consumables business and, overall,
reflected the challenges of unfavorable winter weather, heightened
competition and the current economic environment,” said
“We continue to grow both our customer traffic and average transaction amount as our merchandising initiatives reinforce our affordability and value messaging. Sales trends began to improve in April and have continued to gain momentum. We are pleased to see that our merchandising strategies are gaining traction with a strengthening of sales in both consumables and non-consumables in our second quarter to date. Looking ahead, we are confirming our sales and EPS guidance for the year, and we are confident that we have the right strategies to drive long-term shareholder value.”
The Company’s net income was
Adjusted net income is defined as net income excluding specifically
identified expenses. Adjustments in the 2013 first quarter included a
loss of
Financial Highlights
Net sales increased 6.8 percent to
Gross profit, as a percentage of sales, was 30.0 percent in the 2014 first quarter, a decrease of 57 basis points from the 2013 first quarter. The majority of the gross profit rate decrease was due to consumables comprising a larger portion of net sales, primarily as a result of increased sales of lower margin consumables, including tobacco and perishable products. In addition, markdowns were higher in the 2014 first quarter, primarily related to increased promotional activity, partially offset by higher initial markups on inventory purchases.
Selling, general and administrative expense (“SG&A”) as a percentage of sales was 21.6 percent in the 2014 first quarter compared to 21.3 percent in the 2013 first quarter, an increase of 37 basis points. The moderate same-store sales growth in the quarter was a primary factor in the deleverage of SG&A. Rent and utilities expenses were significant contributors to the overall increase in SG&A as a percentage of sales. These costs were partially offset by workers’ compensation and general liability expenses which declined in the 2014 period compared to the 2013 period.
Interest expense decreased to
The effective income tax rate in the 2014 first quarter was 37.8 percent
compared to 37.4 percent in the 2013 first quarter. The effective tax
rate increased approximately 100 basis points due to the expiration of
various federal job credit programs (primarily the Work Opportunity Tax
Credit) for eligible employees hired after
Merchandise Inventories
As of
Long-Term Obligations
As of
Capital Expenditures
Total additions to property and equipment in the 2014 first quarter were
Share Repurchases
In the 2014 first quarter, the Company repurchased 14.1 million shares
of its common stock under its share repurchase program at a total cost
of
Fiscal 2014 Financial Outlook
For the 2014 fiscal year, the Company expects total sales to increase 8
to 9 percent over the 2013 fiscal year, with same-store sales expected
to increase 3 to 4 percent. Diluted EPS for the fiscal year is expected
to be approximately
The volatility of the macroeconomic environment continues to pressure the consumer and impact the Company’s cost of purchasing and delivering merchandise to its stores. Management continues to closely monitor customers’ responses to the economic and competitive climates.
Conference Call Information
The Company will hold a conference call on
Non-GAAP Disclosure
Certain financial information 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
net income and adjusted diluted earnings per share (“EPS”). Adjusted net
income is defined as net income excluding specifically identified
expenses, 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 2014 is based on comparable
adjustments. The Company believes that providing comparisons to 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 are more
indicative of the Company’s operations and provide an additional
relevant comparison of the Company’s performance across periods.
Adjustments to net income and EPS in 2013 included
Reconciliations of these non-GAAP measures to the most directly comparable measures calculated in accordance with GAAP are provided in the accompanying schedules. In addition, for reference, the schedules also include calculations of SG&A and operating profit, excluding certain items.
Forward-Looking Statements
This press release contains forward-looking information, such as the
information in the section entitled “Fiscal 2014 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;
- the Company’s level of success in gaining and maintaining broad market acceptance of its private brands;
- disruptions, unanticipated 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, 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, as well as trade restrictions;
- 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, product safety, healthcare, 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 legal proceedings, investigations or audits;
- natural disasters, unusual weather conditions, pandemic outbreaks, terrorist acts and geo-political events;
- damage or interruption to the Company’s information systems;
- 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 or the Company’s inability to hire additional qualified personnel;
- failure to successfully manage inventory balances;
- seasonality of the Company’s business;
- incurrence of material uninsured losses, excessive insurance costs or accident costs;
- a data security breach;
- 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 or a requirement to convert to international financial reporting standards;
-
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) | ||||||||||||
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| 2014 | 2013 | 2014 | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 166,330 | $ | 155,526 | $ | 505,566 | ||||||
| Merchandise inventories | 2,605,356 | 2,414,411 | 2,552,993 | |||||||||
| Prepaid expenses and other current assets | 171,660 | 154,539 | 147,048 | |||||||||
| Total current assets | 2,943,346 | 2,724,476 | 3,205,607 | |||||||||
| Net property and equipment | 2,079,832 | 2,177,264 | 2,080,305 | |||||||||
| Goodwill | 4,338,589 | 4,338,589 | 4,338,589 | |||||||||
| Other intangible assets, net | 1,205,598 | 1,215,999 | 1,207,645 | |||||||||
| Other assets, net | 34,519 | 37,369 | 35,378 | |||||||||
| Total assets | $ | 10,601,884 | $ | 10,493,697 | $ | 10,867,524 | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Current portion of long-term obligations | $ | 100,989 | $ | 909 | $ | 75,966 | ||||||
| Accounts payable | 1,222,680 | 1,138,395 | 1,286,484 | |||||||||
| Accrued expenses and other | 394,827 | 359,038 | 368,578 | |||||||||
| Income taxes payable | 121,277 | 70,540 | 59,148 | |||||||||
| Deferred income taxes | 23,545 | 31,520 | 21,795 | |||||||||
| Total current liabilities | 1,863,318 |
|
1,600,402 | 1,811,971 | ||||||||
| Long-term obligations | 3,006,404 | 2,835,303 | 2,742,788 | |||||||||
| Deferred income taxes | 600,239 | 646,462 | 614,026 | |||||||||
| Other liabilities | 299,696 | 232,631 | 296,546 | |||||||||
| Total liabilities | 5,769,657 |
|
5,314,798 | 5,465,331 | ||||||||
| Commitments and contingencies | ||||||||||||
| Shareholders' equity: | ||||||||||||
| Preferred stock | - | - | - | |||||||||
| Common stock | 265,379 | 286,464 | 277,424 | |||||||||
| Additional paid-in capital | 3,016,262 | 2,992,981 | 3,009,226 | |||||||||
| Retained earnings | 1,560,098 | 1,911,160 | 2,125,453 | |||||||||
| Accumulated other comprehensive loss | (9,512 | ) | (11,706 | ) | (9,910 | ) | ||||||
| Total shareholders' equity | 4,832,227 | 5,178,899 | 5,402,193 | |||||||||
| Total liabilities and shareholders' equity | $ | 10,601,884 |
|
$ | 10,493,697 | $ | 10,867,524 | |||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||||
| Condensed Consolidated Statements of Income | ||||||||||||
| (In thousands, except per share amounts) | ||||||||||||
| (Unaudited) | ||||||||||||
| For the Quarter (13 Weeks) Ended | ||||||||||||
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% of Net |
|
% of Net | |||||||||
| 2014 | Sales | 2013 | Sales | |||||||||
| Net sales | $ | 4,522,081 | 100.00 | % | $ | 4,233,733 | 100.00 | % | ||||
| Cost of goods sold | 3,164,335 | 69.98 | 2,938,585 | 69.41 | ||||||||
| Gross profit | 1,357,746 | 30.02 | 1,295,148 | 30.59 | ||||||||
| Selling, general and administrative expenses | 978,038 | 21.63 | 900,148 | 21.26 | ||||||||
| Operating profit | 379,708 | 8.40 | 395,000 | 9.33 | ||||||||
| Interest expense | 22,267 | 0.49 | 24,516 | 0.58 | ||||||||
| Other (income) expense | - | - | 18,871 | 0.45 | ||||||||
| Income before income taxes | 357,441 | 7.90 | 351,613 | 8.31 | ||||||||
| Income tax expense | 135,043 | 2.99 | 131,530 | 3.11 | ||||||||
| Net income | $ | 222,398 | 4.92 | % | $ | 220,083 | 5.20 | % | ||||
| Earnings per share: | ||||||||||||
| Basic | $ | 0.72 | $ | 0.67 | ||||||||
| Diluted | $ | 0.72 | $ | 0.67 | ||||||||
| Weighted average shares: | ||||||||||||
| Basic | 309,331 | 326,975 | ||||||||||
| Diluted | 310,295 | 328,132 | ||||||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| For the Quarter (13 Weeks) Ended | ||||||||
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| 2014 | 2013 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 222,398 | $ | 220,083 | ||||
|
Adjustments to reconcile net income to net cash from operating activities: |
||||||||
| Depreciation and amortization | 84,158 | 80,493 | ||||||
| Deferred income taxes | (18,542 | ) | 7,999 | |||||
| Tax benefit of share-based awards | (9,398 | ) | (21,633 | ) | ||||
| Loss on debt retirement, net | - | 18,871 | ||||||
| Non-cash share-based compensation | 8,752 | 5,310 | ||||||
| Other non-cash gains and losses | 224 | 148 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Merchandise inventories | (51,536 | ) | (16,411 | ) | ||||
| Prepaid expenses and other current assets | (24,210 | ) | (13,162 | ) | ||||
| Accounts payable | (62,361 | ) | (138,227 | ) | ||||
| Accrued expenses and other liabilities | 30,932 | 7,709 | ||||||
| Income taxes | 71,527 | (3,214 | ) | |||||
| Other | (484 | ) | (740 | ) | ||||
| Net cash provided by (used in) operating activities | 251,460 | 147,226 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (84,088 | ) | (149,652 | ) | ||||
| Proceeds from sales of property and equipment | 103 | 75 | ||||||
| Net cash provided by (used in) investing activities | (83,985 | ) | (149,577 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Issuance of long-term obligations | - | 2,297,177 | ||||||
| Repayments of long-term obligations | (1,434 | ) | (2,119,316 | ) | ||||
| Borrowings under revolving credit facilities | 431,000 | 494,900 | ||||||
| Repayments of borrowings under revolving credit facilities | (141,000 | ) | (608,800 | ) | ||||
| Debt issuance costs | - | (15,938 | ) | |||||
| Payments for cash flow hedge related to debt issuance | - | (13,217 | ) | |||||
| Repurchases of common stock | (800,095 | ) | (20,000 | ) | ||||
| Other equity transactions, net of employee taxes paid | (4,580 | ) | (19,371 | ) | ||||
| Tax benefit of share-based awards | 9,398 | 21,633 | ||||||
| Net cash provided by (used in) financing activities | (506,711 | ) | 17,068 | |||||
| Net increase (decrease) in cash and cash equivalents | (339,236 | ) | 14,717 | |||||
| Cash and cash equivalents, beginning of period | 505,566 | 140,809 | ||||||
| Cash and cash equivalents, end of period | $ | 166,330 | $ | 155,526 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | 24,434 | $ | 15,444 | ||||
| Income taxes | $ | 84,511 | $ | 123,571 | ||||
| Supplemental schedule of non-cash investing and financing activities: | ||||||||
|
Purchases of property and equipment awaiting processing for payment, included in Accounts payable |
$ | 25,639 | $ | 54,162 | ||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||
| Selected Additional Information | ||||||||||
| (Unaudited) | ||||||||||
| Sales by Category (in thousands) | ||||||||||
| For the Quarter (13 Weeks) Ended | ||||||||||
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% Change | ||||||||
| Consumables | $ | 3,445,465 | $ | 3,194,906 | 7.8 | % | ||||
| Seasonal | 541,432 | 529,281 | 2.3 | % | ||||||
| Home products | 283,597 | 265,811 | 6.7 | % | ||||||
| Apparel | 251,587 | 243,735 | 3.2 | % | ||||||
| Net sales | $ | 4,522,081 | $ | 4,233,733 | 6.8 | % | ||||
| Store Activity | ||||||||||
| For the Quarter (13 Weeks) Ended | ||||||||||
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| Beginning store count | 11,132 | 10,506 | ||||||||
| New store openings | 214 | 165 | ||||||||
| Store closings | (8 | ) | (9 | ) | ||||||
| Net new stores | 206 | 156 | ||||||||
| Ending store count | 11,338 | 10,662 | ||||||||
| Total selling square footage (000's) | 83,622 | 78,238 | ||||||||
| Growth rate | 6.9 | % | 7.3 | % | ||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | ||||||||||||||||||||
| Adjusted Net Income and Adjusted Diluted Earnings Per Share | ||||||||||||||||||||
| And Calculation of SG&A and Operating Profit, Excluding Certain Items | ||||||||||||||||||||
| (in millions, except per share amounts) | ||||||||||||||||||||
| For the Quarter (13 Weeks) Ended | ||||||||||||||||||||
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Increase | ||||||||||||||||||
| $ | % of Net Sales | $ | % of Net Sales | $ | % | |||||||||||||||
| Net sales | $ | 4,522.1 | $ | 4,233.7 | $ | 288.3 | 6.8 | % | ||||||||||||
| SG&A | $ | 978.0 | 21.63 | % | $ | 900.1 | 21.26 | % | $ | 77.9 | 8.7 | % | ||||||||
| Secondary offering expenses | - | (0.5 | ) | |||||||||||||||||
| Acceleration of equity-based compensation | - | (0.5 | ) | |||||||||||||||||
| SG&A, excluding certain items | $ | 978.0 | 21.63 | % | $ | 899.1 | 21.24 | % | $ | 78.9 | 8.8 | % | ||||||||
| Operating profit | $ | 379.7 | 8.40 | % | $ | 395.0 | 9.33 | % | $ | (15.3 | ) | (3.9 | )% | |||||||
| Secondary offering expenses | - | 0.5 | ||||||||||||||||||
| Acceleration of equity-based compensation | - | 0.5 | ||||||||||||||||||
| Operating profit, excluding certain items | $ | 379.7 | 8.40 | % | $ | 396.0 | 9.35 | % | $ | (16.3 | ) | (4.1 | )% | |||||||
| Net income | $ | 222.4 | 4.92 | % | $ | 220.1 | 5.20 | % | $ | 2.3 | 1.1 | % | ||||||||
| Secondary offering expenses | - | 0.5 | ||||||||||||||||||
| Acceleration of equity-based compensation | - | 0.5 | ||||||||||||||||||
| Debt refinancing costs | - | 18.9 | ||||||||||||||||||
| Total adjustments | - | 19.9 | ||||||||||||||||||
| Income tax effect of adjustments | - | (7.6 | ) | |||||||||||||||||
| Net adjustments | - | 12.3 | ||||||||||||||||||
| Adjusted net income | $ | 222.4 | 4.92 | % | $ | 232.4 | 5.49 | % | $ | (10.0 | ) | (4.3 | )% | |||||||
| Diluted earnings per share: | ||||||||||||||||||||
| As reported | $ | 0.72 | $ | 0.67 | $ | 0.05 | 7.5 | % | ||||||||||||
| Adjusted | $ | 0.72 | $ | 0.71 | $ | 0.01 | 1.4 | % | ||||||||||||
| Weighted average diluted shares | 310.3 | 328.1 | ||||||||||||||||||
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