Dollar General Corporation DG reported first-quarter fiscal 2015 results, wherein earnings of 84 cents a share beat the Zacks Consensus Estimate by a couple of cents, and rose 16.7% from the year-ago period on the back of higher sales.
Net sales of this discount retailer increased 8.8% to $4,918.7 million but came below the Zacks Consensus Estimate of $4,942 million.
Shares of Dollar General, which failed in its attempt to acquire Family Dollar Stores Inc. FDO, jumped 3% during pre-market trading hours.
Sales in the Consumables category jumped 9% to $3,754 million; the Seasonal category witnessed an 8.3% rise in sales to $586.3 million, while Home products sales increased 6.9% to $303 million. Sales in the Apparel category grew 9.5% to $275.4 million.
Consistently increasing traffic and average transaction value led to 3.7% growth in comparable-store sales. Strength was witnessed across tobacco products, perishables, candy and snacks, health care, seasonal, home and apparel categories.
Gross profit increased 10.4% to $1,498.7 million, while gross margin expanded 45 basis points to 30.5%. Operating profit grew 12.8% to $428.2 million; however, operating margin increased 31 basis points to 8.7%.
Other Financial Details
Dollar General, which competes with Dollar Tree, Inc. DLTR, ended the quarter with cash and cash equivalents of $225.1 million, long-term obligations of $2,614 million and shareholders’ equity of $5,385.9 million.
The company incurred $100 million in capital expenditures during the quarter. Management now projects capital expenditures to be in the band of $500 million to $550 million in fiscal 2015.
The company bought back 7.1 million shares for $534.7 million during the quarter. Since the commencement of the share repurchase program in December 2011, the company has bought back 51.5 million shares aggregating $2.8 billion. The company still has $688.8 million available under its share repurchases authorization.
Stores Update
Dollar General opened 219 new outlets and closed 9 stores during the quarter under review, thereby bringing the total store count to 11,999. 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 continues to expect fiscal 2015 earnings between $3.85 and $3.95 per share. The current Zacks Consensus Estimate for fiscal 2015 is $3.93.
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). A better ranked stock include Target Corp. TGT carrying a Zacks Rank #2 (Buy).
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