Dollar General Corporation Reports First Quarter 2021 Results
Thu, 27 May 2021
Raises Financial Guidance for Fiscal Year 2021
-
Net Sales Decreased 0.6% to
$8.4 Billion - Same-Store Sales Decreased 4.6%; Increased 17.1% on a two-year stack basis1
-
Operating Profit Increased 4.9% to
$908.9 Million -
Diluted Earnings Per Share (“EPS”) Increased 10.2% to
$2.82 -
Cash Flows From Operations of
$703.0 Million -
Board of Directors Declares Quarterly Cash Dividend of
$0.42 per share
1 Same-store sales on a two-year stack basis represents the sum of the Q1 2021 same-store sales decrease and the Q1 2020 same-store sales increase.
“We are pleased with our strong start to fiscal 2021, and I want to thank our associates for their unwavering commitment to supporting our customers, communities, and each other,” said
“During the first quarter, we executed more than 800 real estate projects, including new store openings in our pOpshelf and larger footprint
First Quarter 2021 Highlights
Net sales decreased 0.6% to
Gross profit as a percentage of net sales was 32.8% in the first quarter of 2021 compared to 30.7% in the first quarter of 2020, an increase of 208 basis points. This gross profit rate increase was primarily attributable to higher initial markups on inventory purchases; a reduction in markdowns as a percentage of net sales; a greater proportion of sales coming from the non-consumables product categories, which generally have a higher gross profit rate than the consumables product category; and a reduction in inventory shrink as a percentage of net sales. These factors were partially offset by increased transportation costs, which were primarily impacted by higher transportation rates. In light of the significant increase in sales within its non-consumable product categories, the Company believes consumer behavior driven by government stimulus payments also had a significant positive effect on gross profit dollars.
Selling, general and administrative expenses (“SG&A”) as a percentage of net sales were 22.0% in the first quarter of 2021 compared to 20.5% in the first quarter of 2020, an increase of 152 basis points. Among the expenses that were greater as a percentage of net sales in the current year period were store occupancy costs, disaster expenses related to Winter Storm Uri, retail labor, depreciation and amortization, administrative compensation (driven by share-based compensation), utilities, and taxes and licenses.
Operating profit for the first quarter of 2021 increased 4.9% to
The effective income tax rate in the first quarter of 2021 was 22.0% compared to 22.2% in the first quarter of 2020. This lower effective income tax rate was primarily due to increased tax benefits associated with share-based compensation in the 2021 period compared to the 2020 period.
The Company reported net income of
Merchandise Inventories
As of
Capital Expenditures
Total additions to property and equipment in the first quarter of 2021 were
Share Repurchases
In the first quarter of 2021, the Company repurchased
Dividend
On
Fiscal Year 2021 Financial Guidance and Store Growth Outlook
As noted above, the Company believes its first quarter results were positively impacted by consumer behavior related to government stimulus payments. Nonetheless, significant uncertainty continues to exist regarding the severity and duration of the COVID-19 pandemic, including its impact on the
However, to reflect the strong results in the first quarter, which exceeded the Company’s expectations, the Company is updating its financial guidance issued on
For fiscal year 2021, the Company now expects the following:
- Net sales in the range of a 1% decline to an increase of 1%; compared to its previous expectation in the range of a 2% decline to flat
- Same-store sales decline of 5% to 3%, which reflects growth of approximately 11% to 13% on a two-year stack basis2; compared to its previous expectation of a decline of 6% to 4%
-
Diluted EPS in the range of
$9.50 to$10.20 , which reflects a compound annual growth rate in the range of approximately 20% to 24% (or in the range of approximately 19% to 23% compared to 2019 Adjusted diluted EPS) over a two-year period3; compared to its previous expectation in the range of$8.80 to$9.50 - This Diluted EPS guidance assumes an effective tax rate in the range of 22% to 23%
-
Share repurchases of approximately
$2.2 billion ; compared to its previous expectation of approximately$1.8 billion
In addition, the Company continues to expect capital expenditures, including those related to investments in the Company’s strategic initiatives, in the range of
The Company is also reiterating its plans to execute 2,900 real estate projects in fiscal year 2021, including 1,050 new store openings, 1,750 store remodels, and 100 store relocations.
2 Same-store sales on a two-year stack basis represents the sum of actual 2020 same-store sales and the corresponding low and high ends of the 2021 guidance range.
3 Two-year compound annual growth rates utilize 2019 diluted EPS and 2019 Adjusted diluted EPS (see “Non-GAAP Disclosure” herein) as the base.
Conference Call Information
The Company will hold a conference call on
Non-GAAP Disclosure
Adjusted diluted EPS, and its respective growth metric, for the fiscal year ended
The non-GAAP measure discussed above is not a measure of financial performance or condition, liquidity or profitability in accordance with GAAP, and should not be considered as an alternative to diluted EPS or any other measure derived in accordance with GAAP. This non-GAAP measure has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company’s financial results as reported in accordance with GAAP. Because not all companies use identical calculations, this presentation 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, 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, and cybersecurity risk profile, as well as the effects on domestic and foreign economies and customers’ spending patterns;
- economic factors, including but not limited to employment levels; inflation; pandemics; 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/nutrition assistance programs; commodity rates; transportation, lease and insurance costs; wage rates (including the heightened possibility of increased federal, state and/or local minimum 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, the Company’s SG&A expenses (including real estate costs), and the Company’s sales and profitability;
- failure to achieve or sustain the Company’s strategies and initiatives, including those relating to merchandising, real estate and new store development, store formats and concepts, 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;
- 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;
- 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;
- 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;
- natural disasters, unusual weather conditions (whether or not caused by climate change), pandemic outbreaks or other health crises, political or civil unrest, acts of violence or terrorism, and disruptive global political events;
- product liability, product recall or other product safety or labeling claims;
- incurrence of material uninsured losses, excessive insurance costs or accident costs;
- failure to attract, develop and retain qualified employees while controlling labor costs (including the heightened possibility of increased federal, state and/or local minimum wage rates) 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;
- the impact of changes in or noncompliance with governmental regulations and requirements (including, but not limited to, those dealing with the sale of products, including without limitation, product and food safety, marketing or labeling; information security and privacy; labor and employment; employee wages and benefits (including the heightened possibility of increased federal, state and/or local minimum wage rates); health and safety; imports and customs; and environmental compliance, as well as tax laws (including those related to the corporate tax rate), 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;
- new accounting guidance or changes in the interpretation or application of existing guidance;
- deterioration in market conditions, including market disruptions, limited liquidity and interest rate fluctuations, or changes in the Company’s credit profile;
- 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) |
|
|||||||
|
|
|
|
||||||
|
2021 |
2020 |
2021 |
||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ |
688,055 |
|
$ |
2,673,912 |
|
$ |
1,376,577 |
|
| Merchandise inventories |
|
5,099,465 |
|
|
4,107,331 |
|
|
5,247,477 |
|
| Income taxes receivable |
|
16,637 |
|
|
17,191 |
|
|
90,760 |
|
| Prepaid expenses and other current assets |
|
237,588 |
|
|
194,049 |
|
|
199,405 |
|
| Total current assets |
|
6,041,745 |
|
|
6,992,483 |
|
|
6,914,219 |
|
| Net property and equipment |
|
3,999,170 |
|
|
3,320,141 |
|
|
3,899,997 |
|
| Operating lease assets |
|
9,614,974 |
|
|
8,960,805 |
|
|
9,473,330 |
|
|
4,338,589 |
|
|
4,338,589 |
|
|
4,338,589 |
|
|
| Other intangible assets, net |
|
1,199,840 |
|
|
1,199,961 |
|
|
1,199,870 |
|
| Other assets, net |
|
42,380 |
|
|
36,334 |
|
|
36,619 |
|
| Total assets | $ |
25,236,698 |
|
$ |
24,848,313 |
|
$ |
25,862,624 |
|
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||
| Current liabilities: | |||||||||
| Current portion of operating lease liabilities | $ |
1,101,369 |
|
$ |
991,054 |
|
$ |
1,074,079 |
|
| Accounts payable |
|
3,294,423 |
|
|
2,954,361 |
|
|
3,614,089 |
|
| Accrued expenses and other |
|
861,653 |
|
|
791,368 |
|
|
1,006,552 |
|
| Income taxes payable |
|
57,953 |
|
|
105,865 |
|
|
16,063 |
|
| Total current liabilities |
|
5,315,398 |
|
|
4,842,648 |
|
|
5,710,783 |
|
| Long-term obligations |
|
4,130,710 |
|
|
3,967,801 |
|
|
4,130,975 |
|
| Long-term operating lease liabilities |
|
8,499,442 |
|
|
7,956,759 |
|
|
8,385,388 |
|
| Deferred income taxes |
|
769,430 |
|
|
700,098 |
|
|
710,549 |
|
| Other liabilities |
|
271,793 |
|
|
171,553 |
|
|
263,691 |
|
| Total liabilities |
|
18,986,773 |
|
|
17,638,859 |
|
|
19,201,386 |
|
| Commitments and contingencies | |||||||||
| Shareholders' equity: | |||||||||
| Preferred stock |
|
- |
|
|
- |
|
|
- |
|
| Common stock |
|
206,680 |
|
|
220,259 |
|
|
210,687 |
|
| Additional paid-in capital |
|
3,457,160 |
|
|
3,332,283 |
|
|
3,446,612 |
|
| Retained earnings |
|
2,588,006 |
|
|
3,659,804 |
|
|
3,006,102 |
|
| Accumulated other comprehensive loss |
|
(1,921 |
) |
|
(2,892 |
) |
|
(2,163 |
) |
| Total shareholders' equity |
|
6,249,925 |
|
|
7,209,454 |
|
|
6,661,238 |
|
| Total liabilities and shareholders' equity | $ |
25,236,698 |
|
$ |
24,848,313 |
|
$ |
25,862,624 |
|
| 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 |
|||||
|
2021 |
Sales |
2020 |
Sales |
|||||
| Net sales | $ |
8,400,964 |
100.00 |
% |
$ |
8,448,449 |
100.00 |
% |
|
| Cost of goods sold |
|
5,645,296 |
67.20 |
|
|
5,852,757 |
69.28 |
|
|
| Gross profit |
|
2,755,668 |
32.80 |
|
|
2,595,692 |
30.72 |
|
|
| Selling, general and administrative expenses |
|
1,846,818 |
21.98 |
|
|
1,728,908 |
20.46 |
|
|
| Operating profit |
|
908,850 |
10.82 |
|
|
866,784 |
10.26 |
|
|
| Interest expense |
|
40,392 |
0.48 |
|
|
30,493 |
0.36 |
|
|
| Income before income taxes |
|
868,458 |
10.34 |
|
|
836,291 |
9.90 |
|
|
| Income tax expense |
|
190,709 |
2.27 |
|
|
185,845 |
2.20 |
|
|
| Net income | $ |
677,749 |
8.07 |
% |
$ |
650,446 |
7.70 |
% |
|
| Earnings per share: | |||||||||
| Basic | $ |
2.84 |
$ |
2.58 |
|||||
| Diluted | $ |
2.82 |
$ |
2.56 |
|||||
| Weighted average shares outstanding: | |||||||||
| Basic |
|
238,548 |
|
251,780 |
|||||
| Diluted |
|
240,301 |
|
253,627 |
|||||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||
Condensed Consolidated Statements of Cash Flows |
||||||
(In thousands) |
||||||
(Unaudited) |
||||||
|
|
|
||||
|
For the 13 Weeks Ended |
|||||
|
|
|
||||
|
2021 |
2020 |
||||
| Cash flows from operating activities: | ||||||
| Net income | $ |
677,749 |
|
$ |
650,446 |
|
| Adjustments to reconcile net income to net cash from operating activities: | ||||||
| Depreciation and amortization |
|
154,146 |
|
|
137,655 |
|
| Deferred income taxes |
|
58,794 |
|
|
24,784 |
|
| Noncash share-based compensation |
|
23,533 |
|
|
18,968 |
|
| Other noncash (gains) and losses |
|
13,040 |
|
|
1,569 |
|
| Change in operating assets and liabilities: | ||||||
| Merchandise inventories |
|
135,732 |
|
|
567,902 |
|
| Prepaid expenses and other current assets |
|
(41,831 |
) |
|
(12,000 |
) |
| Accounts payable |
|
(295,206 |
) |
|
110,126 |
|
| Accrued expenses and other liabilities |
|
(136,743 |
) |
|
81,113 |
|
| Income taxes |
|
116,013 |
|
|
156,849 |
|
| Other |
|
(2,236 |
) |
|
(1,086 |
) |
| Net cash provided by (used in) operating activities |
|
702,991 |
|
|
1,736,326 |
|
| Cash flows from investing activities: | ||||||
| Purchases of property and equipment |
|
(277,730 |
) |
|
(195,434 |
) |
| Proceeds from sales of property and equipment |
|
807 |
|
|
466 |
|
| Net cash provided by (used in) investing activities |
|
(276,923 |
) |
|
(194,968 |
) |
| Cash flows from financing activities: | ||||||
| Issuance of long-term obligations |
|
- |
|
|
1,494,315 |
|
| Repayments of long-term obligations |
|
(1,753 |
) |
|
(555 |
) |
| Net increase (decrease) in commercial paper outstanding |
|
- |
|
|
(425,200 |
) |
| 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 |
|
(1,000,352 |
) |
|
(63,080 |
) |
| Payments of cash dividends |
|
(99,832 |
) |
|
(90,617 |
) |
| Other equity and related transactions |
|
(12,653 |
) |
|
(9,006 |
) |
| Net cash provided by (used in) financing activities |
|
(1,114,590 |
) |
|
892,234 |
|
| Net increase (decrease) in cash and cash equivalents |
|
(688,522 |
) |
|
2,433,592 |
|
| Cash and cash equivalents, beginning of period |
|
1,376,577 |
|
|
240,320 |
|
| Cash and cash equivalents, end of period | $ |
688,055 |
|
$ |
2,673,912 |
|
| Supplemental cash flow information: | ||||||
| Cash paid for: | ||||||
| Interest | $ |
55,858 |
|
$ |
48,339 |
|
| Income taxes | $ |
15,801 |
|
$ |
4,154 |
|
| Supplemental schedule of non-cash investing and financing activities: | ||||||
| Right of use assets obtained in exchange for new operating lease liabilities | $ |
417,749 |
|
$ |
418,239 |
|
| Purchases of property and equipment awaiting processing for payment, included in Accounts payable | $ |
93,599 |
|
$ |
93,801 |
|
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||
| Selected Additional Information | ||||||||
| (Unaudited) | ||||||||
| Sales by Category (in thousands) | ||||||||
For the Quarter Ended |
|
|||||||
|
|
|
||||||
2021 |
2020 |
% Change |
||||||
| Consumables | $ |
6,378,135 |
$ |
6,703,449 |
|
-4.9 |
% |
|
| Seasonal |
|
1,050,382 |
|
917,912 |
|
14.4 |
% |
|
| Home products |
|
571,315 |
|
498,282 |
|
14.7 |
% |
|
| Apparel |
|
401,132 |
|
328,806 |
|
22.0 |
% |
|
| Net sales | $ |
8,400,964 |
$ |
8,448,449 |
|
-0.6 |
% |
|
| Store Activity | ||||||||
For the Quarter Ended |
||||||||
|
|
|||||||
2021 |
2020 |
|||||||
| Beginning store count |
|
17,177 |
|
16,278 |
|
|||
| New store openings |
|
260 |
|
250 |
|
|||
| Store closings |
|
(11 |
) |
(28 |
) |
|||
| Net new stores |
|
249 |
|
222 |
|
|||
| Ending store count |
|
17,426 |
|
16,500 |
|
|||
| Total selling square footage (000's) |
|
128,953 |
|
121,930 |
|
|||
| Growth rate (square footage) |
|
5.8 |
% |
5.6 |
% |
|||
| DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | |||
| Reconciliation of Non-GAAP Adjusted Diluted Earnings Per Share | |||
| (Unaudited) | |||
| (in millions, except per share amounts) | |||
For the Year Ended |
|||
|
|||
2020 |
|||
| Net income | $ |
1,712.6 |
|
| Significant Legal Expenses |
|
31.0 |
|
| Deferred tax benefit of Significant Legal Expenses |
|
(6.9 |
) |
| Significant Legal Expenses net of deferred tax benefit |
|
24.1 |
|
| Adjusted net income | $ |
1,736.7 |
|
| Diluted earnings per share: | |||
| As reported | $ |
6.64 |
|
| After-tax impact of Significant Legal Expenses |
|
0.09 |
|
| Adjusted | $ |
6.73 |
|
| Weighted average diluted shares outstanding: |
|
258.1 |
|
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