Dollar General Corporation Reports 3.8% Same-Store Sales Growth for First Quarter 2019
Thu, 30 May 2019
Company Continues to Execute Real Estate Strategy; Opens 240 New Stores and Remodels 330 Stores
Company Reiterates Financial Guidance for Fiscal Year 2019
- Net Sales Increased 8.3%; Same-Store Sales Increased 3.8%
-
Operating Profit Increased 4.5% to
$512.2 million -
Diluted Earnings Per Share (“EPS”) of
$1.48 -
Cash Flows From Operations Increased 4.7% to
$574 million -
$283 Million Returned to Shareholders through Share Repurchases and Cash Dividends -
Board of Directors Declares Second Quarter 2019 Cash Dividend of
$0.32 per share
“Our team continued to make great progress on our strategic initiatives
this quarter, while remaining focused on our four operating priorities,”
said
First Quarter 2019 Highlights
Net sales increased 8.3% to
Gross profit as a percentage of net sales was 30.2% in the first quarter of 2019 compared to 30.5% in the first quarter of 2018, a decrease of 23 basis points. This gross profit rate decrease was primarily attributable to increases in distribution and transportation costs, a greater proportion of sales coming from consumables that generally have a lower gross profit rate than other product categories, and sales of lower margin products comprising a higher proportion of consumables sales. These factors were partially offset by higher initial markups on inventory purchases.
Selling, general and administrative expenses (“SG&A”) as a percentage of net sales were 22.5% in the first quarter of 2019 compared to 22.4% in the first quarter of 2018, an increase of six basis points. This SG&A increase was primarily attributable to increased employee benefits and occupancy costs as a percentage of sales, partially offset by lower repairs and maintenance and workers’ compensation expenses.
Operating profit for the first quarter of 2019 grew 4.5% to
The effective income tax rate in the first quarter of 2019 was 20.8% compared to 21.6% in the first quarter of 2018. This lower effective income tax rate was primarily due to the recognition of a larger tax benefit in the 2019 period associated with stock based compensation than in the 2018 period.
The Company reported net income of
Merchandise Inventories
As of
Capital Expenditures
Total additions to property and equipment in the first quarter of 2019
were
Share Repurchases
The Company repurchased approximately
Dividend
On
Reiterating Fiscal Year 2019 Financial Guidance and Store Growth Outlook
For the 52-week fiscal year ending
For fiscal year 2019, the Company continues to expect the following:
- 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.
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, plans and intentions including, but not
limited to, statements made within the quotation 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, those relating to environmental compliance, product and food safety, labeling and sales, information security and privacy, labor and employment, employee wages, and consumer protection, 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 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, 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 | ||||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||||
| (In thousands) | ||||||||||||
| (Unaudited) | ||||||||||||
|
|
|
|
||||||||||
| 2019 | 2018 | 2019 | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 271,111 | $ | 283,970 | $ | 235,487 | ||||||
| Merchandise inventories | 4,109,759 | 3,594,529 | 4,097,004 | |||||||||
| Income taxes receivable | 25,164 | 28,637 | 57,804 | |||||||||
| Prepaid expenses and other current assets | 177,735 | 258,900 | 272,725 | |||||||||
| Total current assets | 4,583,769 | 4,166,036 | 4,663,020 | |||||||||
| Net property and equipment | 3,008,425 | 2,758,369 | 2,970,806 | |||||||||
| Operating lease assets | 8,140,326 | - | - | |||||||||
|
|
4,338,589 | 4,338,589 | 4,338,589 | |||||||||
| Other intangible assets, net | 1,200,164 | 1,200,375 | 1,200,217 | |||||||||
| Other assets, net | 33,011 | 29,861 | 31,406 | |||||||||
| Total assets | $ | 21,304,284 | $ | 12,493,230 | $ | 13,204,038 | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Current portion of long-term obligations | $ | 555 | $ | 1,889 | $ | 1,950 | ||||||
| Current portion of operating lease liabilities | 894,469 | - | - | |||||||||
| Accounts payable | 2,452,898 | 2,018,320 | 2,385,469 | |||||||||
| Accrued expenses and other | 560,007 | 495,371 | 618,405 | |||||||||
| Income taxes payable | 48,787 | 9,752 | 10,033 | |||||||||
| Total current liabilities | 3,956,716 | 2,525,332 | 3,015,857 | |||||||||
| Long-term obligations | 2,732,105 | 2,862,497 | 2,862,740 | |||||||||
| Long-term operating lease liabilities | 7,238,945 | - | - | |||||||||
| Deferred income taxes | 629,864 | 565,150 | 609,687 | |||||||||
| Other liabilities | 173,985 | 303,933 | 298,361 | |||||||||
| Total liabilities | 14,731,615 | 6,256,912 | 6,786,645 | |||||||||
| Commitments and contingencies | ||||||||||||
| Shareholders' equity: | ||||||||||||
| Preferred stock | - | - | - | |||||||||
| Common stock | 226,032 | 234,109 | 227,072 | |||||||||
| Additional paid-in capital | 3,275,917 | 3,210,527 | 3,252,421 | |||||||||
| Retained earnings | 3,074,584 | 2,795,620 | 2,941,107 | |||||||||
| Accumulated other comprehensive loss | (3,864 | ) | (3,938 | ) | (3,207 | ) | ||||||
| Total shareholders' equity | 6,572,669 | 6,236,318 | 6,417,393 | |||||||||
| Total liabilities and shareholders' equity | $ | 21,304,284 | $ | 12,493,230 | $ | 13,204,038 | ||||||
| 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 | |||||||||
| 2019 | Sales | 2018 | Sales | |||||||||
| Net sales | $ | 6,623,185 | 100.00 | % | $ | 6,114,463 | 100.00 | % | ||||
| Cost of goods sold | 4,620,909 | 69.77 | 4,252,214 | 69.54 | ||||||||
| Gross profit | 2,002,276 | 30.23 | 1,862,249 | 30.46 | ||||||||
| Selling, general and administrative expenses | 1,490,039 | 22.50 | 1,372,065 | 22.44 | ||||||||
| Operating profit | 512,237 | 7.73 | 490,184 | 8.02 | ||||||||
| Interest expense | 25,933 | 0.39 | 24,773 | 0.41 | ||||||||
| Income before income taxes | 486,304 | 7.34 | 465,411 | 7.61 | ||||||||
| Income tax expense | 101,291 | 1.53 | 100,559 | 1.64 | ||||||||
| Net income | $ | 385,013 | 5.81 | % | $ | 364,852 | 5.97 | % | ||||
| Earnings per share: | ||||||||||||
| Basic | $ | 1.49 | $ | 1.36 | ||||||||
| Diluted | $ | 1.48 | $ | 1.36 | ||||||||
| Weighted average shares outstanding: | ||||||||||||
| Basic | 259,021 | 268,267 | ||||||||||
| Diluted | 260,265 | 269,135 | ||||||||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| For the 13 Weeks Ended | ||||||||
|
|
|
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| 2019 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 385,013 | $ | 364,852 | ||||
|
Adjustments to reconcile net income to net cash from operating activities: |
||||||||
| Depreciation and amortization | 122,485 | 109,335 | ||||||
| Deferred income taxes | 10,303 | 8,046 | ||||||
| Noncash share-based compensation | 13,631 | 12,406 | ||||||
| Other noncash (gains) and losses | 3,527 | 3,340 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Merchandise inventories | (14,252 | ) | 12,356 | |||||
| Prepaid expenses and other current assets | (7,392 | ) | 3,294 | |||||
| Accounts payable | 39,707 | 5,043 | ||||||
| Accrued expenses and other liabilities | (47,679 | ) | (55,124 | ) | ||||
| Income taxes | 71,394 | 85,276 | ||||||
| Other | (2,542 | ) | (176 | ) | ||||
| Net cash provided by (used in) operating activities | 574,195 | 548,648 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (144,757 | ) | (164,630 | ) | ||||
| Proceeds from sales of property and equipment | 453 | 631 | ||||||
| Net cash provided by (used in) investing activities | (144,304 | ) | (163,999 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Issuance of long-term obligations | - | 499,495 | ||||||
| Repayments of long-term obligations | (525 | ) | (400,330 | ) | ||||
| Net increase (decrease) in commercial paper outstanding | (121,300 | ) | (237,200 | ) | ||||
| Costs associated with issuance and retirement of debt | - | (4,444 | ) | |||||
| Repurchases of common stock | (199,986 | ) | (150,001 | ) | ||||
| Payments of cash dividends | (82,756 | ) | (77,657 | ) | ||||
| Other equity and related transactions | 10,300 | 2,017 | ||||||
| Net cash provided by (used in) financing activities | (394,267 | ) | (368,120 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 35,624 | 16,529 | ||||||
| Cash and cash equivalents, beginning of period | 235,487 | 267,441 | ||||||
| Cash and cash equivalents, end of period | $ | 271,111 | $ | 283,970 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | 48,960 | $ | 43,162 | ||||
| Income taxes | $ | 19,623 | $ | 7,274 | ||||
| Supplemental schedule of non-cash investing and financing activities: | ||||||||
| Right of use assets obtained in exchange for new operating lease liabilities | $ | 358,806 | $ | - | ||||
|
Purchases of property and equipment awaiting processing for payment, included in Accounts payable |
$ | 91,384 | $ | 66,684 | ||||
| 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 | $ | 5,213,155 | $ | 4,772,388 | 9.2 | % | ||||
| Seasonal | 736,978 | 691,031 | 6.6 | % | ||||||
| Home products | 375,713 | 354,633 | 5.9 | % | ||||||
| Apparel | 297,339 | 296,411 | 0.3 | % | ||||||
| Net sales | $ | 6,623,185 | $ | 6,114,463 | 8.3 | % | ||||
| Store Activity | ||||||||||
| For the Quarter Ended | ||||||||||
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| 2019 | 2018 | |||||||||
| Beginning store count | 15,370 | 14,534 | ||||||||
| New store openings | 240 | 241 | ||||||||
| Store closings | (13 | ) | (14 | ) | ||||||
| Net new stores | 227 | 227 | ||||||||
| Ending store count | 15,597 | 14,761 | ||||||||
| Total selling square footage (000's) | 115,468 | 109,415 | ||||||||
| Growth rate (square footage) | 5.5 | % | 8.3 | % | ||||||
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