Dollar General (DG) Tops Q4 Earnings & Sales; Guides FY17

Dollar General CorporationDG reported better-than-expected earnings in fourth-quarter fiscal 2016 after missing the same in the trailing two quarters. The company posted adjusted earnings of $1.49 per share that surpassed the Zacks Consensus Estimate of $1.41 and also increased 14.6% from the year-ago period.

Net sales came in at $6,009.2 million, an increase of 13.7% from the prior-year quarter. Moreover, net sales came above the Zacks Consensus Estimate of $5,969 million, marking the first quarter of revenues beat in 14 quarters.

Following the results, the company's shares are up roughly 1% during pre-market trading session. However, in the past one year the company's shares have declined 13.5%, underperforming the Zacks categorized Retail-Discount & Variety industry which has lost 3.6%.

The company's robust results were driven by robust performance of consumables, seasonal, home products and apparel.

The company's comparable-store sales inched up 1% year over year primarily owing to rise in average transaction amount. However, the gain was marginally overshadowed by fall in traffic that moderated from the second and third quarters. Consumables and home products categories provided a boost to the comparable-store sales while the seasonal and apparel categories had a negative impact.

Sales in the Consumables category jumped 15.1% to $4,505.5 million, while the Seasonal category witnessed a rise of 8.5% in sales to $800.5 million. Home products sales increased 11.3% to $405.2 million and Apparel category sales grew 10.2% to $297.9 million.

Gross profit increased 13% to $1,900.7 million, while gross margin contracted 20 basis points (bps) to 31.6% due to increased markdowns, on account of inventory clearance and promotional activities along with a higher percentage of sales of consumables.

Operating profit rose 11.1% to $680.6 million, while operating margin decreased 30 bps to 11.3%.

Dollar General Corporation Price, Consensus and EPS Surprise

Dollar General Corporation Price, Consensus and EPS Surprise | Dollar General Corporation Quote

Other Financial Details

Dollar General ended the quarter with cash and cash equivalents of $187.9 million, long-term obligations of $2,710.6 million and shareholders' equity of $5,406.3 million. During fiscal 2016, the company incurred capital expenditures of $560 million. Capital expenditure for fiscal 2017 is expected to be in the range of $650-$700 million.

The company bought back 12.4 million shares during fiscal 2016 for $990 million. Since the commencement of the share repurchase program in Dec 2011, the company has bought back 74.4 million shares aggregating $4.6 billion. On Aug 24, 2016, it announced an additional share repurchase program of $1 billion, thereby increasing the share repurchases authorization to nearly $1.4 billion. The company still has nearly $930 million of share repurchase left under current authorization. Further in fiscal 2017, the company expects share repurchase of nearly $450 million.

Store Update

Dollar General opened 900 new outlets and remodeled or relocated 906 outlets during fiscal 2016. During fiscal 2017, the company plans to open about 1,000 stores and remodel or relocate approximately 900 stores. As of Feb 3, 2017, Dollar General operated 13,320 stores across 43 states.


Dollar General provided fiscal 2017 guidance wherein the company expects net sales growth in the range of 4-6%. Same-store sales growth is expected to be marginally positive to up 2% while earnings per share are expected to be between $4.25 and $4.50. The Zacks Consensus Estimate for fiscal 2017 is currently pegged at $4.71. Due to lapping of the 53rd week in 2016,, the company expects fiscal 2017 net sales and earnings to be negatively impacted by 2% and 8%, respectively.

Zacks rank & Stocks to Consider

Dollar General's currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the retail space include Central Garden & Pet Company CENT , Kate Spade & Company KATE and Prestige Brands Holdings, Inc. PBH . All of these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Central Garden & Pet has surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average beat of 120.5% and also has an impressive long-term earnings growth rate of 10%.

Kate Spade & Company shares have gained nearly 28% in the past six months.

Prestige Brands Holdings stock has gained nearly 22% in the past six months and has long-term earnings growth rate of 9.8%.

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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 Nasdaq, Inc.

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

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