Dollar General Corporation Reports First Quarter 2020 Results
Thu, 28 May 2020
- Net Sales Increased 27.6%; Same-Store Sales Increased 21.7%
-
Operating Profit Increased 69.2% to
$866.8 million -
Diluted Earnings Per Share (“EPS”) Increased 73.0% to
$2.56 -
Cash Flows From Operations Increased 202.4% to
$1.7 billion -
Company Issued
$1.5 Billion of Senior Notes -
Board of Directors Declares Second Quarter 2020 Cash Dividend of
$0.36 per share - Company Provides Fiscal Year 2020 Financial Update
“These are certainly unprecedented times, and our hearts go out to everyone who has been affected by the COVID-19 pandemic,” said
“Looking ahead, we remain committed to our operating priorities and strategic initiatives to drive continued growth and meaningful long-term value for shareholders. As one of America’s essential retailers, we believe our unique brick-and-mortar footprint positions us well to continue delivering value and convenience for our customers, particularly at a time when they need us most.”
First Quarter 2020 Highlights
Net sales increased 27.6% to
Gross profit as a percentage of net sales was 30.7% in the first quarter of 2020 compared to 30.2% in the first quarter of 2019, an increase of 49 basis points. This gross profit rate increase was primarily attributable to a reduction in markdowns as a percentage of net sales and higher initial markups on inventory purchases; partially offset by an increase in distribution costs, which were driven by increased volume and discretionary bonus expense. As a result of the significant increase in sales, the Company believes consumer behavior driven by COVID-19 also had a significant positive effect on gross profit dollars.
Selling, general and administrative expenses (“SG&A”) as a percentage of net sales were 20.5% in the first quarter of 2020 compared to 22.5% in the first quarter of 2019, a decrease of 204 basis points. Although the Company incurred certain incremental costs related to COVID-19, they were more than offset by the significant increase in net sales discussed above. Expenses that were lower as a percentage of net sales in the current year period include occupancy costs, retail labor, utilities, depreciation and amortization, and taxes and licenses. These items were partially offset by increased incentive compensation expenses.
Operating profit for the first quarter of 2020 increased 69.2% to
The effective income tax rate in the first quarter of 2020 was 22.2% compared to 20.8% in the first quarter of 2019. This higher effective income tax rate was primarily due to an increase in pre-tax earnings in the 2020 period compared to the 2019 period while items impacting the effective rate, such as the benefits from stock-based compensation and federal tax credits, remained materially the same in amount in both the 2020 and 2019 periods.
The Company reported net income of
COVID-19 Update
To demonstrate continued appreciation for the exceptional efforts of employees, and to further safeguard the well-being of its team members and customers,
-
Awarded approximately
$60 million in appreciation bonuses to front-line workers - Temporarily adjusted benefits and leave policies, including offering additional paid time off for those who received a COVID-19 diagnosis or who were required to care for an immediate family or household member who received a COVID-19 diagnosis, and an additional enrollment period for Telehealth services
- Provided masks, gloves, and hand sanitizer to employees in stores and distribution centers
- Implemented social distancing measures inside stores and distribution center common areas
- Initiated installation of plexiglass barriers at checkout registers (now completed throughout the chain)
- Reduced store operating hours to allow for additional time to clean and re-stock shelves
- Dedicated a “senior” hour every day for the most vulnerable community members to shop
-
Donated
$250,000 to theDollar General Employee Assistance Foundation -
Provided discounts for first responders, medical personnel, and
National Guard members
Merchandise Inventories
As of
Capital Expenditures
Total additions to property and equipment in the first quarter of 2020 were
Share Repurchases
The Company temporarily suspended repurchases of its common stock under its share repurchase program during the first quarter of 2020 to evaluate the implications of the COVID-19 pandemic. The Company repurchased
Dividend
On
Liquidity
To further strengthen the Company’s liquidity position during the quarter, the Company issued
Fiscal Year 2020 Update
As noted above, the Company realized a significant sales benefit in the first quarter of the fiscal year as a result of COVID-19. In addition, since the end of the first quarter, the Company has continued to experience elevated demand in its stores, albeit with slightly more variability and some moderation in recent days. As a result, through
Due to the significant uncertainty that continues to exist around the severity and duration of the COVID-19 pandemic, including its impact on the
However, for fiscal year 2020, the Company continues to plan for:
-
Capital expenditures in the range of
$925 million to$975 million , including those related to investments in the Company’s strategic initiatives - Approximately 2,600 real estate projects, including 1,000 new store openings, 1,500 mature store remodels, and 80 store relocations.
In addition, the Company currently intends to resume share repurchase activity as soon as management determines it is prudent and advisable to do so, which may be as early as the 2020 second quarter.
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 and intentions including, but not limited to, statements made within the quotation of
- risks related to the COVID-19 pandemic, including but not limited to, the effects on the Company’s supply chain, distribution network, store and distribution center growth, store and distribution center closures, transportation and distribution costs, SG&A expenses, share repurchase activity, as well as domestic and foreign economies and customers’ spending patterns;
- economic factors, including but not limited to employment levels; inflation; higher fuel, energy, healthcare 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, technology, the Company’s Fresh initiative and the Company’s Fast Track initiative;
- 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 urban 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, promotional activity, expanded availability of mobile, web-based and other digital technologies, and alliances or other business combinations;
- levels of inventory shrinkage;
- failure to successfully manage inventory balances;
- failure to maintain the security of the Company’s business, customer, employee or vendor information or to comply with privacy laws;
- 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 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, those relating to environmental compliance, product and food safety or labeling, information security and privacy, 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, arbitrations, derivative 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, acts of violence or terrorism, and global political events;
- 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 their 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;
- 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) |
|
|
||||||||
|
|
|
|
|
|
|
||||||
|
2020 |
|
2019 |
|
2020 |
|||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ |
2,673,912 |
|
$ |
271,111 |
|
$ |
240,320 |
|
|||
| Merchandise inventories |
|
4,107,331 |
|
|
4,109,759 |
|
|
4,676,848 |
|
|||
| Income taxes receivable |
|
17,191 |
|
|
25,164 |
|
|
76,537 |
|
|||
| Prepaid expenses and other current assets |
|
194,049 |
|
|
177,735 |
|
|
184,163 |
|
|||
| Total current assets |
|
6,992,483 |
|
|
4,583,769 |
|
|
5,177,868 |
|
|||
| Net property and equipment |
|
3,320,141 |
|
|
3,008,425 |
|
|
3,278,359 |
|
|||
| Operating lease assets |
|
8,960,805 |
|
|
8,140,326 |
|
|
8,796,183 |
|
|||
|
4,338,589 |
|
|
4,338,589 |
|
|
4,338,589 |
|
||||
| Other intangible assets, net |
|
1,199,961 |
|
|
1,200,164 |
|
|
1,200,006 |
|
|||
| Other assets, net |
|
36,334 |
|
|
33,011 |
|
|
34,079 |
|
|||
| Total assets | $ |
24,848,313 |
|
$ |
21,304,284 |
|
$ |
22,825,084 |
|
|||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Current portion of long-term obligations | $ |
580 |
|
$ |
555 |
|
$ |
555 |
|
|||
| Current portion of operating lease liabilities |
|
991,054 |
|
|
894,469 |
|
|
964,805 |
|
|||
| Accounts payable |
|
2,954,361 |
|
|
2,452,898 |
|
|
2,860,682 |
|
|||
| Accrued expenses and other |
|
791,368 |
|
|
560,007 |
|
|
709,156 |
|
|||
| Income taxes payable |
|
105,865 |
|
|
48,787 |
|
|
8,362 |
|
|||
| Total current liabilities |
|
4,843,228 |
|
|
3,956,716 |
|
|
4,543,560 |
|
|||
| Long-term obligations |
|
3,967,221 |
|
|
2,732,105 |
|
|
2,911,438 |
|
|||
| Long-term operating lease liabilities |
|
7,956,759 |
|
|
7,238,945 |
|
|
7,819,683 |
|
|||
| Deferred income taxes |
|
700,098 |
|
|
629,864 |
|
|
675,227 |
|
|||
| Other liabilities |
|
171,553 |
|
|
173,985 |
|
|
172,676 |
|
|||
| Total liabilities |
|
17,638,859 |
|
|
14,731,615 |
|
|
16,122,584 |
|
|||
| Commitments and contingencies | ||||||||||||
| Shareholders' equity: | ||||||||||||
| Preferred stock |
|
- |
|
|
- |
|
|
- |
|
|||
| Common stock |
|
220,259 |
|
|
226,032 |
|
|
220,444 |
|
|||
| Additional paid-in capital |
|
3,332,283 |
|
|
3,275,917 |
|
|
3,322,531 |
|
|||
| Retained earnings |
|
3,659,804 |
|
|
3,074,584 |
|
|
3,162,660 |
|
|||
| Accumulated other comprehensive loss |
|
(2,892 |
) |
|
(3,864 |
) |
|
(3,135 |
) |
|||
| Total shareholders' equity |
|
7,209,454 |
|
|
6,572,669 |
|
|
6,702,500 |
|
|||
| Total liabilities and shareholders' equity | $ |
24,848,313 |
|
$ |
21,304,284 |
|
$ |
22,825,084 |
|
|||
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES |
|||||||||||
Condensed Consolidated Statements of Income |
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(In thousands, except per share amounts) |
|||||||||||
(Unaudited) |
|||||||||||
|
|
|
|
|
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||||
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For the Quarter Ended |
||||||||||
|
|
|
% of Net |
|
|
|
% of Net |
||||
|
2020 |
|
Sales |
|
2019 |
|
Sales |
||||
| Net sales | $ |
8,448,449 |
100.00 |
% |
$ |
6,623,185 |
100.00 |
% |
|||
| Cost of goods sold |
|
5,852,757 |
69.28 |
|
|
4,620,909 |
69.77 |
|
|||
| Gross profit |
|
2,595,692 |
30.72 |
|
|
2,002,276 |
30.23 |
|
|||
| Selling, general and administrative expenses |
|
1,728,908 |
20.46 |
|
|
1,490,039 |
22.50 |
|
|||
| Operating profit |
|
866,784 |
10.26 |
|
|
512,237 |
7.73 |
|
|||
| Interest expense |
|
30,493 |
0.36 |
|
|
25,933 |
0.39 |
|
|||
| Income before income taxes |
|
836,291 |
9.90 |
|
|
486,304 |
7.34 |
|
|||
| Income tax expense |
|
185,845 |
2.20 |
|
|
101,291 |
1.53 |
|
|||
| Net income | $ |
650,446 |
7.70 |
% |
$ |
385,013 |
5.81 |
% |
|||
| Earnings per share: | |||||||||||
| Basic | $ |
2.58 |
$ |
1.49 |
|||||||
| Diluted | $ |
2.56 |
$ |
1.48 |
|||||||
| Weighted average shares outstanding: | |||||||||||
| Basic |
|
251,780 |
|
259,021 |
|||||||
| Diluted |
|
253,627 |
|
260,265 |
|||||||
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES |
||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||
(In thousands) |
||||||||
(Unaudited) |
||||||||
|
|
|
|
|
||||
|
|
For the 13 Weeks Ended |
||||||
|
|
|
|
|
||||
|
|
2020 |
|
2019 |
||||
| Cash flows from operating activities: | ||||||||
| Net income | $ |
650,446 |
|
$ |
385,013 |
|
||
| Adjustments to reconcile net income to net cash from operating activities: | ||||||||
| Depreciation and amortization |
|
137,655 |
|
|
122,485 |
|
||
| Deferred income taxes |
|
24,784 |
|
|
10,303 |
|
||
| Noncash share-based compensation |
|
18,968 |
|
|
13,631 |
|
||
| Other noncash (gains) and losses |
|
1,569 |
|
|
3,527 |
|
||
| Change in operating assets and liabilities: | ||||||||
| Merchandise inventories |
|
567,902 |
|
|
(14,252 |
) |
||
| Prepaid expenses and other current assets |
|
(12,000 |
) |
|
(7,392 |
) |
||
| Accounts payable |
|
110,126 |
|
|
39,707 |
|
||
| Accrued expenses and other liabilities |
|
81,113 |
|
|
(47,679 |
) |
||
| Income taxes |
|
156,849 |
|
|
71,394 |
|
||
| Other |
|
(1,086 |
) |
|
(2,542 |
) |
||
| Net cash provided by (used in) operating activities |
|
1,736,326 |
|
|
574,195 |
|
||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment |
|
(195,434 |
) |
|
(144,757 |
) |
||
| Proceeds from sales of property and equipment |
|
466 |
|
|
453 |
|
||
| Net cash provided by (used in) investing activities |
|
(194,968 |
) |
|
(144,304 |
) |
||
| Cash flows from financing activities: | ||||||||
| Issuance of long-term obligations |
|
1,494,315 |
|
|
- |
|
||
| Repayments of long-term obligations |
|
(555 |
) |
|
(525 |
) |
||
| Net increase (decrease) in commercial paper outstanding |
|
(425,200 |
) |
|
(121,300 |
) |
||
| Borrowings under revolving credit facilities |
|
300,000 |
|
|
- |
|
||
| Repayments of borrowings under revolving credit facilities |
|
(300,000 |
) |
|
- |
|
||
| Costs associated with issuance of debt |
|
(13,623 |
) |
|
- |
|
||
| Repurchases of common stock |
|
(63,080 |
) |
|
(199,986 |
) |
||
| Payments of cash dividends |
|
(90,617 |
) |
|
(82,756 |
) |
||
| Other equity and related transactions |
|
(9,006 |
) |
|
10,300 |
|
||
| Net cash provided by (used in) financing activities |
|
892,234 |
|
|
(394,267 |
) |
||
| Net increase (decrease) in cash and cash equivalents |
|
2,433,592 |
|
|
35,624 |
|
||
| Cash and cash equivalents, beginning of period |
|
240,320 |
|
|
235,487 |
|
||
| Cash and cash equivalents, end of period | $ |
2,673,912 |
|
$ |
271,111 |
|
||
| Supplemental cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ |
48,339 |
|
$ |
48,960 |
|
||
| Income taxes | $ |
4,154 |
|
$ |
19,623 |
|
||
| Supplemental schedule of non-cash investing and financing activities: | ||||||||
| Right of use assets obtained in exchange for new operating lease liabilities | $ |
418,239 |
|
$ |
358,806 |
|
||
| Purchases of property and equipment awaiting processing for payment, included in Accounts payable | $ |
93,801 |
|
|
$ |
91,384 |
||
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES |
||||||||||
Selected Additional Information |
||||||||||
(Unaudited) |
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|
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|
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|
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||||
Sales by Category (in thousands) |
|
|||||||||
|
|
|
|
|
|
|
||||
|
For the Quarter Ended |
|
|
|
||||||
|
|
|
|
|
|
|
||||
|
2020 |
|
2019 |
|
% Change |
|
||||
| Consumables | $ |
6,703,449 |
$ |
5,213,155 |
|
28.6 |
% |
|||
| Seasonal |
|
917,912 |
|
736,978 |
|
24.6 |
% |
|||
| Home products |
|
498,282 |
|
375,713 |
|
32.6 |
% |
|||
| Apparel |
|
328,806 |
|
297,339 |
|
10.6 |
% |
|||
| Net sales | $ |
8,448,449 |
$ |
6,623,185 |
|
27.6 |
% |
|||
Store Activity |
||||||||||
|
|
|
|
|
|
|||||
|
|
|
For the Quarter Ended |
|||||||
|
|
|
|
|
|
|||||
|
|
|
2020 |
|
2019 |
|||||
| Beginning store count |
|
16,278 |
|
15,370 |
|
|||||
| New store openings |
|
250 |
|
240 |
|
|||||
| Store closings |
|
(28 |
) |
(13 |
) |
|||||
| Net new stores |
|
222 |
|
227 |
|
|||||
| Ending store count |
|
16,500 |
|
15,597 |
|
|||||
| Total selling square footage (000's) |
|
121,930 |
|
115,468 |
|
|||||
| Growth rate (square footage) |
|
5.6 |
% |
5.5 |
% |
|||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20200528005193/en/
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