Dollar General Corporation DG came up with first-quarter fiscal 2024 results, wherein both the top and bottom lines beat the Zacks Consensus Estimate. While net sales increased year over year, earnings declined from the year-ago period. This Goodlettsville, TN-based company also reported a decent same-store sales number.
Let’s Delve Deeper
The quarterly earnings of $1.65 per share came ahead of the Zacks Consensus Estimate of $1.57 per share but declined 29.5% from the prior-year period.
Net sales of $9,914 million came ahead of the Zacks Consensus Estimate of $9,868 million and grew 6.1% year over year. This can be attributed to sales contributions from new stores and growth in same-store sales, partly offset by the impact of store closures.
For the quarter, net sales by category showed varied performance. Consumables saw a significant increase of 8.3%, reaching $8,210.9 million. The Seasonal category experienced marginal growth of 0.1%, totaling $963.5 million. In contrast, home product sales declined 9.9% to $478.8 million, while apparel saw a decrease of 2%, with sales dropping to $260.9 million.
Dollar General Corporation Price, Consensus and EPS Surprise
Dollar General Corporation price-consensus-eps-surprise-chart | Dollar General Corporation Quote
Same-store sales rose 2.4% owing to a rise in customer traffic, somewhat offset by a decline in the average transaction amount. The metric saw growth in the consumables category, partly offset by declines in each of the home products, seasonal and apparel categories. We had expected same-store sales to increase 1.7% in the quarter under review.
The gross margin shrunk 145 basis points to 30.2%. This contraction in the gross margin was mainly due to higher shrinkage and inventory markdowns, an increased share of sales from the consumables category and lower inventory markups. However, these were somewhat mitigated by a reduced LIFO provision. We had expected a gross margin contraction of 140 basis points.
SG&A expenses, as a percentage of net sales, increased 97 basis points to 24.7% in the quarter. We anticipated 110 basis points deleverage in SG&A expenses.
We note that the operating profit declined 26.3% year over year to $546.1 million, whereas the operating margin contracted 240 basis points to 5.5%. We envisioned a 250-basis point decrease in the operating margin.
Store Update
During the quarter under discussion, Dollar General opened 197 new stores, remodeled 463 stores and relocated 21 stores. In fiscal 2024, the company anticipates carrying out 2,435 real estate projects, including 730 new store openings, 1,620 remodels and 85 store relocations.
Other Financial Details
Dollar General ended the quarter with cash and cash equivalents of $720.7 million, long-term obligations of $6,222.4 million and total shareholders’ equity of $7,000.2 million. Management incurred capital expenditures of $342 million during the quarter. For fiscal 2024, the company anticipates capital expenditures in the band of $1.3-$1.4 billion.
During the quarter, Dollar General did not repurchase shares. The company had $1.4 billion remaining under its authorization at the end of the quarter. The company did not intend to repurchase shares in fiscal 2024.
Outlook
For fiscal 2024, management continues to project net sales growth in the band of 6-6.7% and same-store sales growth between 2% and 2.7%.
Dollar General reiterated its fiscal 2024 earnings forecast in the band of $6.80-$7.55 per share. The projected numbers include the adverse impact of nearly 50 cents per share owing to higher incentive compensation.
For the second quarter, management anticipates same-store sales growth in the low 2% range and earnings in the band of $1.70-$1.85 per share.
Shares of this Zacks Rank #3 (Hold) company have risen 3.4% in the past six months compared with the industry’s growth of 21.5%.
Don’t Miss These Solid Bets
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The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings suggests growth of around 8% and 9.5%, respectively, from the year-ago reported figure.
Casey’s General Stores CASY, the third largest convenience retailer and fifth largest pizza chain in the United States, currently carries a Zacks Rank #2 (Buy). CASY has a trailing four-quarter earnings surprise of 12%, on average.
The Zacks Consensus Estimate for Casey’s current financial-year earnings implies growth of around 10.4% from the year-ago reported numbers.
Tractor Supply Company TSCO, the largest rural lifestyle retailer in the United States, currently carries a Zacks Rank #2. TSCO has a trailing four-quarter earnings surprise of 2.7%, on average.
The Zacks Consensus Estimate for Tractor Supply Company’s current financial-year sales and earnings calls for growth of around 3% and 2.4%, respectively, from the year-ago reported numbers.
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