Dollar General Corporation DG reported fourth-quarter fiscal 2014 results, wherein earnings of $1.17 per share met the Zacks Consensus Estimate, and rose 15.8% from the year-ago period. Net sales of this discount retailer increased 9.9% to $4,939.1 million but came below the Zacks Consensus Estimate of $4,957 million.
Shares of Dollar General, which failed in its attempt to acquire Family Dollar Stores Inc. FDO, jumped 2.5% during pre-market trading hours.
Sales in the Consumables category jumped 10.7% to $3,654.4 million; the Seasonal category witnessed a 5.7% rise in sales to $685.3 million, while Home products sales increased 9.7% to $337.5 million. Sales in the Apparel category grew 11.2% to $261.8 million.
Consistently increasing traffic and average transaction value led to 4.9% growth in comparable-store sales. Strength was witnessed across all categories, primarily in tobacco products, perishables, candy and snacks and health care.
Gross profit increased 9.1% to $1,565.4 million, while gross margin contracted 23 basis points to 31.7% due to higher sales of low margin products like consumables. Operating profit grew a 5.3% to $566.7 million; however, operating margin shriveled 50 basis points to 11.5%.
Other Financial Details
Dollar General ended the quarter with cash and cash equivalents of $579.8 million, long-term obligations of $2,639.4 million and shareholders’ equity of $5,710 million.
The company incurred $374 million in capital expenditures during fiscal 2014. Management now projects capital expenditures to be in the band of $500 million to $550 million in fiscal 2015.
The company bought back 14.1 million shares for $800 million during fiscal 2014. Since the commencement of the share repurchase program in December 2011, the company has bought back 44.5 million shares aggregating $2.3 billion. The company’s Board of Directors recently announced an additional buyback program of $1 billion, thereby increasing the total authorization above of $1.2 billion.
Dollar General also initiated quarterly dividend of 22 cents a share that will be paid on April 22, 2015 to shareholders of record as of April 8, 2015.
Stores Update
Dollar General opened 700 new outlets, while closing 43 stores during fiscal 2014, thereby bringing the total store count to 11,789. The company remodeled or relocated 915 outlets during fiscal. The company’s plan is to open about 730 new stores and relocate or remodel around 875 stores during fiscal 2015. Further, the company plans to increase new store openings at a rate of 7% square footage growth in fiscal 2016.
Guidance
Dollar General now projects fiscal 2015 earnings between $3.85 and $3.95 per share. The current Zacks Consensus Estimate for fiscal is $3.96.
For fiscal 2015, total sales are expected to grow 8% to 9% year-over-year, while comparable-store sales are expected to increase in the range of 3% to 3.5%. Management envisions operating profit growth of 7% to 9% over fiscal 2014 adjusted operating profit.
Zacks Rank
Dollar General currently carries a Zacks Rank #3 (Hold). Other favorably ranked stocks include Burlington Stores, Inc. BURL and Ross Stores Inc. ROST both carrying a Zacks Rank #2 (Buy).
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