Dollar General Corporation
) posted better-than-expected third-quarter fiscal 2013 results,
wherein earnings of 72 cents a share beat the Zacks Consensus
Estimate by a couple of cents and jumped 14.3% from 63 cents in
the year-ago quarter. Consumables category was the driving factor
behind the sturdy results.
Including one-time items, earnings came in at 74 cents a share
compared with 62 cents earned in the prior-year quarter.
Net sales increased 10.5% to $4,381.8 million, reflecting an
11.9% jump in the Consumables category to $3,362.8 million. The
Seasonal category witnessed a 7.3% rise in sales to $505.8
million, while Home products increased 7.3% to $276.8 million.
Sales in the Apparel category rose 2.4% to $236.5 million. Net
sales fell short of the Zacks Consensus Estimate of $4,420
Higher traffic and average transaction count led to 4.4%
growth in comparable-store sales. Sales of the consumables
category continue to improve, primarily buoyed by the sturdy
sales of tobacco products, perishables, candy and snacks. Comps
also remained strong across seasonal and home products.
Gross profit increased 8.3% to $1,328.5 million, while gross
margin contracted 61 basis points to 30.3% during the quarter.
The decline reflected higher sales of low margin products like
consumables. Moreover, inventory shrinkage and markdowns hampered
Adjusted operating profit increased 7.7% to $390.2 million,
while adjusted operating margin shriveled 23 basis points to
Other Financial Details
The company ended the quarter with cash and cash equivalents
of $165.7 million, long-term obligations of $2,874 million and
shareholders' equity of $5,275 million.
The company lowered its interest expense to $21.5 million from
$27.7 million in the year- ago quarter. The company had incurred
$444 million in capital expenditures during the first-nine months
Dollar General bought back 3.5 million shares for $200 million
during the quarter. Since the commencement of the share
repurchase program in Dec 2011, the company has bought back 27.1
million shares aggregating $1.3 billion. Recently, the company's
board authorized an additional $1 billion share buyback program,
resulting in total authorization of $1.2 billion.
Dollar General opened 577 new outlets, closed 22 stores and
remodeled or relocated 534 stores during the first-nine months of
2013. In fiscal 2013, the company plans to open 650 new stores
and remodel or relocate about 550 stores.
During fiscal 2014, the company expects to open about 700 new
stores, and remodel or relocate approximately 525 outlets. The
company anticipates its new distribution center in Pennsylvania
to be fully functional in first-quarter fiscal 2014.
Dollar General now projects fiscal 2013 earnings in the range
of $3.18 to $3.22 per share, indicating an increase in the lower
end of the previously provided guidance of $3.15 to $3.22. The
current Zacks Consensus Estimate for the year is $3.22 per
Total sales are expected to rise by 10% to 10.5% year over
year, while comparable-store sales are expected to increase by 4%
to 4.5%. Earlier, management had anticipated sales increase of
10% to 11%, with comps growth of 4% to 5%.
Adjusted operating profit is expected in the range of $1.745
billion to $1.770 billion. Interest expense is forecasted to be
$90 million, while it projects capital expenditures in the range
of $550 million to $600 million.
Other Stocks to Consider
Currently, Dollar General, which operates 11,061 stores, holds
a Zacks Rank #4 (Sell). Other better ranked stocks worth
considering in the retail sector include
Michael Kors Holdings Ltd
Big Lots Inc.
), all sporting a Zacks Rank #2 (Buy).
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