Dollar General Q4 Profit Jumps, Plans 625 New Stores

Dollar GeneralGoodlettsville, TN—Reporting today that its fourth quarter profit was up 31% as more cost-conscious shoppers hit its stores, Dollar General said it plans to add another 625 store this year, including larger sized ones.

For the quarter ended Feb. 3, the dollar store reported net income of $292.5 million, or 85 cents a share, compared with $222.5 million, or 64 cents a share, a year ago. Excluding one-time items such as stock-based compensation, per share earnings rose to 87 cents from 65 cents a year ago.

Total sales jumped 20% to $4.19 billion, (a 12% increase when excluding an extra week from last year). Comparable store were up 6.5% as both customer traffic and the average transaction amount increased.

The report easily beat analysts’ average estimate expecting earnings of 82 cents a share on revenue of $4.11 billion.

Gross margin narrowed to 32.2% from 32.4% as purchase costs rose on inflation, the company said.

Expanding Apparel, Accessories Offerings

Sales of consumables, the store’s biggest sales generator, increased 23% to $3 billion. Seasonal merchandise sales were up 12%, while apparel and accessories sales were up 5.4%.

“While we are seeing some indications of positive trends in the economy, we believe our customer’s discretionary spending will continue to be constrained in 2012,” Richard Dreiling, ceo, said on a conference call with analysts.

If gasoline prices continue to increase, it might be a boost to Dollar General. “Gas prices put pressure on the non-consumable side of the business, but that’s more than offset by other people coming in for the consumables,” Dreiling said. “When gas prices get higher. more customers need us.”

Besides increasing its lower priced $1 merchandise, Dollar General also plans to increase its apparel and accessories offerings to expand its appeal.

Additionally, Dollar General plans to spend about $600 million to $650 million on capital expenditures, which include adding 625 new stores as well as refurbishing new ones. About 80 of the new stores are expected to open in new markets, including California, Nevada, Connecticut, Massachusetts and New Hampshire. The company also will be adding some 10,000-square-foot stores as a test.

Dollar General’s earnings and sales forecasts were in line with analysts’ expectations. For its fiscal full year, the company expects earnings of $2.65 to $2.75 a share. Analysts’ average estimate expects $2.71.

Sales are expected to grow 8% to 9% with comparable store sales up 3% to 5%. Analysts’ average estimate expects an 8% sales increase.

 

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