Dollar General Earnings Miss by a Penny - Analyst Blog

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Dollar General Corporation 's ( DG ) first-quarter fiscal 2014 earnings came in at 72 cents a share that missed the Zacks Consensus Estimate by a penny but rose 1.4% from 71 cents in the year-ago quarter on the back of growth across the Consumables category.

Net sales increased 6.8% to $4,522.1 million but fell short of the Zacks Consensus Estimate of $4,570 million. Unfavorable weather condition, tough competition and cautious consumer spending environment did weigh upon the company's performance.

Sales in the Consumables category jumped 7.8% to $3,445.5 million; the Seasonal category witnessed a 2.3% rise in sales to $541.4 million, while Home products sales increased 6.7% to $283.6 million. Sales in the Apparel category grew 3.2% to $251.6 million.

Higher traffic and average transaction count led to 1.5% growth in comparable-store sales. Sales of the consumables category continue to improve, primarily buoyed by the sturdy sales of tobacco products, perishables and candy and snacks.

Gross profit increased 4.8% to $1,357.7 million, while gross margin contracted 57 basis points to 30% due to higher sales of low margin products like consumables. Moreover, higher markdowns also hampered margins.

Operating profit declined 3.9% to $379.7 million, whereas operating margin shriveled about 90 basis points to 8.4%.

Other Financial Details

The company ended the quarter with cash and cash equivalents of $166.3 million, long-term obligations of $3,006.4 million and shareholders' equity of $4,832.2 million. 

The company lowered its interest expense to $22.3 million from $24.5 million in the year- ago quarter. The company had incurred $84 million in capital expenditures during the quarter. Management projects capital expenditures in the range of $450 million to $500 million.

Dollar General bought back 14.1 million shares for $800 million during the quarter. Since the commencement of the share repurchase program in Dec 2011, the company has bought back 44.5 million shares aggregating $2.3 billion. The company still has $223 million remaining under its current share repurchase authorization.

Stores Update

Dollar General opened 214 new outlets and closed 8 stores during the quarter, thereby bringing the total store count to 11,338. During fiscal 2014, the company plans to open about 700 new stores and to relocate or remodel about 500 stores. Further, the company expects to finish approximately 400 limited scope remodels during the year.

Guidance

Dollar General reiterates fiscal 2014 earnings between $3.45 and $3.55 per share. The current Zacks Consensus Estimate of $3.52 dovetails with the company's guidance range.

For fiscal 2014, total sales are expected to rise by 8% to 9% year over year, while comparable-store sales are expected to increase by 3% to 4%.

Zacks Rank

Currently, Dollar General carries a Zacks Rank #4 (Sell). Other better ranked stocks worth considering in the retail sector include Columbia Sportswear Company ( COLM ), Hanesbrands Inc. ( HBI ) and V.F. Corp. ( VFC ), all holding a Zacks Rank #2 (Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: DG , VFC , COLM , HBI

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