Dollar General Corporation
), an operator of a discount retailer in the southern,
southwestern, midwestern, and eastern United States, reported
healthy second quarter 2012 results. The company's quarterly
earnings of 69 cents per share came in ahead of the Zacks Consensus
Estimate of 64 cents. Moreover, it handily outperformed the
year-ago earnings of 52 cents, registering an upside of 33% year
over year, mainly due to increased sales and higher gross
Dollar General's total revenue grew 10.4% in the quarter to
$3,948.7 million from $3,575.2 million in the comparable prior-year
quarter. Higher sales were primarily driven by an improvement of
5.1% in comparable store sales over the prior-year due to higher
average transaction and customer traffic. However, total revenue
missed the Zacks Consensus Estimate of $3,959 million.
During the quarter, consumable goods increased at a superior
rate compared with non-consumable goods mainly driven by company's
expansion initiatives. Moreover, the company's home and seasonal
categories along with some departments in apparel, accessories,
sleepwear and intimates also experienced sales growth.
Dollar General's quarterly gross profit climbed 10.0% year over
year to $1,263.2 million, while gross margin contracted 10 basis
points to 32.0%. The increase in gross profit was mainly
attributable to higher initial inventory markups and decline in
fuel cost with better transport efficiency.
Adjusted operating income for the quarter grew 10.9% to $388.1
million, while operating margin remained almost flat at 9.8%
compared with the year-ago period, primarily benefiting from a
contraction in selling, general and administrative expenses as a
percentage of sales.
Dollar General ended the second quarter with cash and cash
equivalents of $134.2 million compared with $113.1 million at the
end of the prior-year quarter. The company had an outstanding
long-term obligation (including the current portion) of $2,887.6
million as of August 3, 2012. During the first six months of fiscal
2012, the company spent $304 million on capital expenditure.
During the quarter, the company's board of directors approved an
additional share repurchases of $500 million without any time limit
in relation to expiry of such authorization. This approval brings
the total authorization of share repurchases to $1 billion,
including the approval of $500 million sanctioned in December,
2011. To date, the company has already bought back 11.7 million
shares worth $485 million.
During the six-month period, the company further expanded its
stores network by opening about 295 stores, shutting down 29 stores
as well as renovating and relocating 416 stores. This brings the
company's total store count to 10,203, increasing the total square
footage area by 7.3%
Based on the better-than-expected second-quarter 2012 results,
along with impressive start of the third-quarter, Dollar General
raised its outlook for fiscal 2012. The company now anticipates
same-store sales to increase in the range of 4% - 5%, higher than
its prior guidance of low end 3%. Moreover, the company now
projects adjusted earnings in the range of $2.77 - $2.85 per share
for fiscal 2012 compared with its prior guidance range of $2.68 -
$2.78 per share. Further, the company forecasts operating profit to
lie in the range of $1.64 - $1.66 billion, better than its previous
guidance of $1.62 - $1.66 billion.
Dollar General Corporation, which faces stiff competition from
Family Dollar Store Inc.
Dollar Tree Inc.
), carries a Zacks #2 Rank implying short-term Buy rating on the
stock for the next 1-3 months.
DOLLAR GENERAL (DG): Free Stock Analysis Report
DOLLAR TREE INC (DLTR): Free Stock Analysis
FAMILY DOLLAR (FDO): Free Stock Analysis Report
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