Updates Financial Guidance for Fiscal Year
2022
Dollar General Corporation (NYSE: DG) today reported financial
results for its fiscal year 2022 second quarter (13 weeks) ended
July 29, 2022.
- Net Sales Increased 9.0% to $9.4 Billion
- Same-Store Sales Increased 4.6%
- Operating Profit Increased 7.5% to $913 Million
- Diluted Earnings Per Share (“EPS”) Increased 10.8% to
$2.98
- Year-to-Date Cash Flows From Operations of $948 Million
- Company Updates Real Estate Plans for Fiscal Year 2022
- Board of Directors Increases Share Repurchase Program
Authorization; Declares Quarterly Cash Dividend of $0.55 per
share
“We are pleased with our second quarter results, and I want to
thank our associates for delivering another quarter of strong
performance during a period of inflation and economic uncertainty,”
said Todd Vasos, Dollar General’s chief executive officer. “The
quarter was highlighted by same-store sales growth of 4.6%, a
slight increase in customer traffic, accelerated growth in market
share of highly consumable product sales, and double-digit growth
in EPS.”
“During the quarter, we also made significant progress advancing
our operating priorities and strategic initiatives, further
enhancing our unique value and convenience proposition. Looking
ahead, we are confident that our strategic actions, which have
transformed this company in recent years and solidified Dollar
General as the clear leader in small-box discount retail, have
positioned us well for continued success, while supporting
long-term shareholder value creation.”
Second Quarter 2022
Highlights
Net sales increased 9.0% to $9.4 billion in the second quarter
of 2022 compared to $8.7 billion in the second quarter of 2021. The
net sales increase was primarily driven by positive sales
contributions from new stores and growth in same-store sales,
partially offset by the impact of store closures. Same-store sales
increased 4.6% compared to the second quarter of 2021, driven
primarily by an increase in average transaction amount, as well as
a slight increase in customer traffic. Same-store sales in the
second quarter of 2022 included growth in the consumables category,
partially offset by declines in each of the apparel, seasonal, and
home products categories.
Gross profit as a percentage of net sales was 32.3% in the
second quarter of 2022 compared to 31.6% in the second quarter of
2021, an increase of 69 basis points. This gross profit rate
increase was primarily attributable to higher inventory markups;
partially offset by an increased LIFO provision, which was driven
higher by product costs; a greater proportion of sales coming from
the consumables category, which generally has a lower gross profit
rate than other product categories; and increases in markdowns,
transportation costs, distribution costs, and inventory
damages.
Selling, general and administrative expenses (“SG&A”) as a
percentage of net sales were 22.6% in the second quarter of 2022
compared to 21.8% in the second quarter of 2021, an increase of 82
basis points. The primary expenses that were a greater percentage
of net sales in the current year period were retail labor, repairs
& maintenance, utilities and payroll taxes.
Operating profit for the second quarter of 2022 increased 7.5%
to $913.4 million compared to $849.6 million in the second quarter
of 2021.
The effective income tax rate in the second quarter of 2022 was
22.1% compared to 21.4% in the second quarter of 2021. This higher
effective income tax rate was primarily due to a reduced benefit
from stock-based compensation, partially offset by a lower
effective state income tax rate in the 2022 period when compared to
the 2021 period.
The Company reported net income of $678.0 million for the second
quarter of 2022, an increase of 6.4% compared to $637.0 million in
the second quarter of 2021. Diluted EPS increased 10.8% to $2.98
for the second quarter of 2022 compared to diluted EPS of $2.69 in
the second quarter of 2021.
Merchandise Inventories
As of July 29, 2022, total merchandise inventories, at cost,
were $6.9 billion compared to $5.3 billion as of July 30, 2021, an
increase of 25.1% on a per-store basis. This increase primarily
reflects the impact of product cost inflation, and a greater mix of
higher-value products, particularly in the Home and Seasonal
categories as a result of the continued rollout of the Company’s
non-consumables initiative.
Capital Expenditures
Total additions to property and equipment in the 26-week period
ended July 29, 2022 were $659 million, including approximately:
$255 million for improvements, upgrades, remodels and relocations
of existing stores; $210 million related to store facilities,
primarily for leasehold improvements, fixtures and equipment in new
stores; $157 million for distribution and transportation-related
projects; and $22 million for information systems upgrades and
technology-related projects. During the second quarter of 2022, the
Company opened 227 new stores, remodeled 533 stores, and relocated
30 stores.
Share Repurchases
In the second quarter of 2022, the Company repurchased $349
million of its common stock, or 1.5 million shares, at an average
price of $233.36 per share, under its share repurchase program. The
total remaining authorization for future repurchases was $1.0
billion at the end of the second quarter of 2022. On August 24,
2022, the Company’s Board of Directors increased the authorization
under the share repurchase program by $2.0 billion. Under the
authorization, repurchases may be made from time to time in open
market transactions, including pursuant to trading plans adopted in
accordance with Rule 10b5-1 of the Securities Exchange Act of 1934,
as amended, or in privately negotiated transactions. The timing,
manner and number of shares repurchased will depend on a variety of
factors, including price, market conditions, compliance with the
covenants and restrictions under the Company’s debt agreements and
other factors. The authorization has no expiration date.
Dividend
On August 23, 2022, the Company’s Board of Directors declared a
quarterly cash dividend of $0.55 per share on the Company’s common
stock, payable on or before October 18, 2022 to shareholders of
record on October 4, 2022. While the Board of Directors intends to
continue regular cash dividends, the declaration and amount of
future dividends are subject to the sole discretion of the Board
and will depend upon, among other things, the Company’s results of
operations, cash requirements, financial condition, contractual
restrictions, and other factors the Board may deem relevant in its
sole discretion.
Fiscal Year 2022 Financial Guidance and
Store Growth Outlook
While ongoing uncertainties exist with respect to product cost
inflation, supply chain dynamics, new store opening delays, and the
evolution of consumer spending throughout the year, the Company is
updating its sales guidance, and reiterating the remainder of its
financial guidance for the 53-week fiscal year ending February 3,
2023 (“fiscal year 2022”) issued on May 26, 2022. The Company now
expects the following:
- Net sales growth of approximately 11%, including an estimated
benefit of approximately two percentage points from the 53rd week;
compared to its previous expectation of approximately 10.0% -
10.5%, including an estimated benefit of approximately two
percentage points from the 53rd week; and
- Same-store sales growth of approximately 4.0% - 4.5%; compared
to its previous expectation of approximately 3.0% - 3.5%.
The Company continues to expect the following:
- Diluted EPS growth in the range of approximately 12% to 14%,
including an estimated benefit of approximately four percentage
points from the 53rd week;
- This Diluted EPS guidance now assumes a revised expectation of
an effective tax rate in the range of 22.0% - 22.5%; compared to
its previous expectation in the range of 22.5% - 23.0%;
- Share repurchases of approximately $2.75 billion; and
- Capital expenditures, including those related to investments in
the Company’s strategic initiatives, in the range of $1.4 billion -
$1.5 billion.
As a result of ongoing delays in permitting and the receipt of
construction materials associated with new store openings, the
Company is updating its plans for real estate projects for fiscal
year 2022. The Company now plans to execute 2,930 to 2,980 real
estate projects, including 1,010 to 1,060 new store openings,
approximately 1,795 remodels, and approximately 125 store
relocations. This is compared to its previous expectation to
execute 2,980 real estate projects, including 1,110 new store
openings, 1,750 remodels, and 120 store relocations.
Conference Call
Information
The Company will hold a conference call on August 25, 2022 at
9:00 a.m. CT/10:00 a.m. ET, hosted by Todd Vasos, chief executive
officer, Jeff Owen, chief operating officer, and John Garratt,
chief financial officer. To participate via telephone, please call
(877) 407-0890 at least 10 minutes before the conference call is
scheduled to begin. The conference ID is 13731252. There will also
be a live webcast of the call available at
https://investor.dollargeneral.com under “News & Events, Events
& Presentations.” A replay of the conference call will be
available through September 22, 2022, and will be accessible via
webcast replay or by calling (877) 660-6853. The conference ID for
the telephonic replay is 13731252.
Forward-Looking
Statements
This press release contains forward-looking information within
the meaning of the federal securities laws, including the Private
Securities Litigation Reform Act. Forward-looking statements
include those regarding the Company’s outlook, strategy,
initiatives, plans and intentions including, but not limited to,
statements made within the quotation of Mr. Vasos, and in the
sections entitled “Share Repurchases,” “Dividend,” and “Fiscal Year
2022 Financial Guidance and Store Growth Outlook.” A reader can
identify forward-looking statements because they are not limited to
historical fact or they use words such as “outlook,” “may,” “will,”
“should,” “could,” “would,” “can,” “believe,” “anticipate,” “plan,”
“project,” “expect,” “estimate,” “target,” “forecast,” “predict,”
“position,” “assume,” “opportunities,” “intend,” “continue,”
“future,” “beyond,” “ongoing,” “potential,” “long-term,”
“guidance,” “goal,” “outcome,” “uncertainty,” “look to,” “move
ahead,” “looking ahead,” “subject to,” “committed,” “confident,”
“focus on,” or “likely to,” and similar expressions that concern
the Company’s strategies, plans, initiatives, intentions or beliefs
about future occurrences or results. These matters involve risks,
uncertainties and other factors that may change at any time and may
cause actual results to differ materially from those which the
Company expected. Many of these statements are derived from the
Company’s operating budgets and forecasts as of the date of this
release, which are based on many detailed assumptions that the
Company believes are reasonable. However, it is very difficult to
predict the effect of known factors on future results, and the
Company cannot anticipate all factors that could affect future
results that may be important to an investor. All forward-looking
information should be evaluated in the context of these risks,
uncertainties and other factors. Important factors that could cause
actual results to differ materially from the expectations expressed
in or implied by such forward-looking statements include, but are
not limited to:
- risks related to the COVID-19 pandemic and associated
governmental responses, including but not limited to, the effects
on the Company’s supply chain, distribution network and capacity,
store and distribution center growth, store and distribution center
closures, transportation and distribution costs, SG&A expenses,
share repurchase activity, and cybersecurity risk profile, as well
as the effects on domestic and foreign economies, the global supply
chain, labor availability, and customers’ spending patterns;
- economic factors, including but not limited to employment
levels; inflation; pandemics; higher fuel, energy, healthcare and
housing costs, interest rates, consumer debt levels, and tax rates;
tax law changes that negatively affect credits and refunds; lack of
available credit; decreases in, or elimination of, government
stimulus programs or subsidies such as unemployment and
food/nutrition assistance programs; commodity rates;
transportation, lease and insurance costs; wage rates (including
the heightened possibility of increased federal, state and/or local
minimum wage rates); foreign exchange rate fluctuations; measures
or events that create barriers to or increase the costs of
international trade (including increased import duties or tariffs);
and changes in laws and regulations and their effect on, as
applicable, customer spending and disposable income, the Company’s
ability to execute its strategies and initiatives, the Company’s
cost of goods sold, the Company’s SG&A expenses (including real
estate costs), and the Company’s sales and profitability;
- failure to achieve or sustain the Company’s strategies and
initiatives, including those relating to merchandising, real estate
and new store development, international expansion, store formats
and concepts, digital, marketing, health services, shrink,
sourcing, private brand, inventory management, supply chain, store
operations, expense reduction, technology, pOpshelf, DG Fresh
initiative, Fast Track, and DG Media Network;
- competitive pressures and changes in the competitive
environment and the geographic and product markets where the
Company operates, including, but not limited to, pricing,
promotional activity, expanded availability of mobile, web-based
and other digital technologies, and alliances or other business
combinations;
- failure to timely and cost-effectively execute the Company’s
real estate projects or to anticipate or successfully address the
challenges imposed by the Company’s expansion, including into new
countries or domestic markets, states, or urban or suburban
areas;
- levels of inventory shrinkage;
- failure to successfully manage inventory balances, issues
related to supply chain disruptions, seasonal buying pattern
disruptions, and distribution network capacity;
- failure to maintain the security of the Company’s business,
customer, employee or vendor information or to comply with privacy
laws, or the Company or one of its vendors falling victim to a
cyberattack (which risk is heightened as a result of the current
conflict between Russia and Ukraine) that prevents the Company from
operating all or a portion of its business;
- damage or interruption to the Company’s information systems as
a result of external factors, staffing shortages or challenges in
maintaining or updating the Company’s existing technology or
developing or implementing new technology;
- a significant disruption to the Company’s distribution network,
the capacity of the Company’s distribution centers or the timely
receipt of inventory, or delays in constructing, opening or
staffing new distribution centers;
- risks and challenges associated with sourcing merchandise from
suppliers, including, but not limited to, those related to
international trade (for example, disruptive political events like
the current conflict between Russia and Ukraine);
- natural disasters, unusual weather conditions (whether or not
caused by climate change), pandemic outbreaks or other health
crises, political or civil unrest, acts of war, violence or
terrorism, and disruptive global political events (for example, the
current conflict between Russia and Ukraine);
- product liability, product recall or other product safety or
labeling claims;
- incurrence of material uninsured losses, excessive insurance
costs or accident costs;
- failure to attract, develop and retain qualified employees
while controlling labor costs (including the heightened possibility
of increased federal, state and/or local minimum wage rates/salary
levels) and other labor issues;
- loss of key personnel or inability to hire additional qualified
personnel;
- risks associated with the Company’s private brands, including,
but not limited to, the Company’s level of success in improving
their gross profit rate;
- seasonality of the Company’s business;
- failure to protect the Company’s reputation;
- the impact of changes in or noncompliance with governmental
regulations and requirements (including, but not limited to, those
dealing with the sale of products, including without limitation,
product and food safety, marketing or labeling; information
security and privacy; labor and employment; employee wages and
benefits (including the heightened possibility of increased
federal, state and/or local minimum wage rates/salary levels);
health and safety; imports and customs; bribery; climate change;
and environmental compliance, as well as tax laws (including those
related to the federal, state or foreign corporate tax rate), the
interpretation of existing tax laws, or the Company’s failure to
sustain its reporting positions negatively affecting the Company’s
tax rate) and developments in or outcomes of private actions, class
actions, multi-district litigation, arbitrations, derivative
actions, administrative proceedings, regulatory actions or other
litigation or of inquiries from federal, state and local agencies,
regulatory authorities, attorneys general, committees,
subcommittees and members of the U.S. Congress, and other local,
state, federal and international governmental authorities;
- new accounting guidance or changes in the interpretation or
application of existing guidance;
- deterioration in market conditions, including market
disruptions, limited liquidity and interest rate fluctuations, or
changes in the Company’s credit profile;
- the factors disclosed under “Risk Factors” in the Company’s
most recent Annual Report on Form 10-K and any subsequently filed
Quarterly Reports on Form 10-Q; and
- such other factors as may be discussed or identified in this
press release.
All forward-looking statements are qualified in their entirety
by these and other cautionary statements that the Company makes
from time to time in its SEC filings and public communications. The
Company cannot assure the reader that it will realize the results
or developments the Company anticipates or, even if substantially
realized, that they will result in the consequences or affect the
Company or its operations in the way the Company expects.
Forward-looking statements speak only as of the date made. The
Company undertakes no obligation, and specifically disclaims any
duty, to update or revise any forward-looking statements as a
result of new information, future events or circumstances, or
otherwise, except as otherwise required by law. As a result of
these risks and uncertainties, readers are cautioned not to place
undue reliance on any forward-looking statements included herein or
that may be made elsewhere from time to time by, or on behalf of,
the Company.
Investors should also be aware that while the Company does, from
time to time, communicate with securities analysts and others, it
is against the Company’s policy to disclose to them any material,
nonpublic information or other confidential commercial information.
Accordingly, shareholders should not assume that the Company agrees
with any statement or report issued by any securities analyst
regardless of the content of the statement or report. Furthermore,
the Company has a policy against confirming projections, forecasts
or opinions issued by others. Thus, to the extent that reports
issued by securities analysts contain any projections, forecasts or
opinions, such reports are not the Company’s responsibility.
About Dollar General
Corporation
Dollar General Corporation has been delivering value to shoppers
for more than 80 years. Dollar General helps shoppers Save time.
Save money. Every day.® by offering products that are frequently
used and replenished, such as food, snacks, health and beauty aids,
cleaning supplies, basic apparel, housewares and seasonal items at
everyday low prices in convenient neighborhood locations. Dollar
General operated 18,566 stores in 47 states as of July 29, 2022. In
addition to high-quality private brands, Dollar General sells
products from America's most-trusted manufacturers such as Clorox,
Energizer, Procter & Gamble, Hanes, Coca-Cola, Mars, Unilever,
Nestle, Kimberly-Clark, Kellogg's, General Mills, and PepsiCo.
Learn more about Dollar General at www.dollargeneral.com.
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES Condensed
Consolidated Balance Sheets (In thousands)
(Unaudited)
July 29
July 30
January 28
2022
2021
2022
ASSETS Current assets: Cash and cash equivalents
$
326,263
$
313,666
$
344,829
Merchandise inventories
6,935,856
5,279,273
5,614,325
Income taxes receivable
93,283
127,011
97,394
Prepaid expenses and other current assets
327,490
272,768
247,295
Total current assets
7,682,892
5,992,718
6,303,843
Net property and equipment
4,648,187
4,104,193
4,346,127
Operating lease assets
10,319,225
9,805,081
10,092,930
Goodwill
4,338,589
4,338,589
4,338,589
Other intangible assets, net
1,199,700
1,199,810
1,199,750
Other assets, net
50,663
47,417
46,132
Total assets
$
28,239,256
$
25,487,808
$
26,327,371
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Current portion of long-term obligations
$
900,635
$
-
$
-
Current portion of operating lease liabilities
1,231,064
1,127,841
1,183,559
Accounts payable
4,358,388
3,369,984
3,738,604
Accrued expenses and other
1,069,926
973,025
1,049,139
Income taxes payable
6,773
8,234
8,055
Total current liabilities
7,566,786
5,479,084
5,979,357
Long-term obligations
4,290,700
4,156,765
4,172,068
Long-term operating lease liabilities
9,070,328
8,661,716
8,890,709
Deferred income taxes
906,846
781,477
825,254
Other liabilities
216,105
271,631
197,997
Total liabilities
22,050,765
19,350,673
20,065,385
Commitments and contingencies Shareholders' equity:
Preferred stock
-
-
-
Common stock
197,372
204,142
201,265
Additional paid-in capital
3,627,987
3,504,850
3,587,914
Retained earnings
2,364,098
2,429,821
2,473,999
Accumulated other comprehensive loss
(966
)
(1,678
)
(1,192
)
Total shareholders' equity
6,188,491
6,137,135
6,261,986
Total liabilities and shareholders' equity
$
28,239,256
$
25,487,808
$
26,327,371
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES Condensed
Consolidated Statements of Income (In thousands, except per
share amounts) (Unaudited)
For the Quarter Ended
July 29
% of Net
July 30
% of Net
2022
Sales
2021
Sales
Net sales
$
9,425,713
100.00
%
$
8,650,198
100.00
%
Cost of goods sold
6,377,490
67.66
5,912,539
68.35
Gross profit
3,048,223
32.34
2,737,659
31.65
Selling, general and administrative expenses
2,134,797
22.65
1,888,091
21.83
Operating profit
913,426
9.69
849,568
9.82
Interest expense
43,098
0.46
39,430
0.46
Income before income taxes
870,328
9.23
810,138
9.37
Income tax expense
192,298
2.04
173,119
2.00
Net income
$
678,030
7.19
%
$
637,019
7.36
%
Earnings per share: Basic
$
3.00
$
2.71
Diluted
$
2.98
$
2.69
Weighted average shares outstanding: Basic
226,299
234,924
Diluted
227,456
236,406
For the 26 Weeks Ended
July 29
% of Net
July 30
% of Net
2022
Sales
2021
Sales
Net sales
$
18,177,065
100.00
%
$
17,051,162
100.00
%
Cost of goods sold
12,390,479
68.17
11,557,835
67.78
Gross profit
5,786,586
31.83
5,493,327
32.22
Selling, general and administrative expenses
4,127,003
22.70
3,734,909
21.90
Operating profit
1,659,583
9.13
1,758,418
10.31
Interest expense
82,774
0.46
79,822
0.47
Income before income taxes
1,576,809
8.67
1,678,596
9.84
Income tax expense
346,122
1.90
363,828
2.13
Net income
$
1,230,687
6.77
%
$
1,314,768
7.71
%
Earnings per share: Basic
$
5.41
$
5.55
Diluted
$
5.39
$
5.52
Weighted average shares outstanding: Basic
227,388
236,736
Diluted
228,533
238,354
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES Condensed
Consolidated Statements of Cash Flows (In thousands)
(Unaudited)
For the 26 Weeks Ended
July 29
July 30
2022
2021
Cash flows from operating activities: Net income
$
1,230,687
$
1,314,768
Adjustments to reconcile net income to net cash from operating
activities: Depreciation and amortization
349,722
312,682
Deferred income taxes
81,419
70,755
Noncash share-based compensation
42,093
39,903
Other noncash (gains) and losses
214,128
51,036
Change in operating assets and liabilities: Merchandise inventories
(1,528,744
)
(80,038
)
Prepaid expenses and other current assets
(87,244
)
(72,072
)
Accounts payable
622,346
(245,382
)
Accrued expenses and other liabilities
22,389
(25,479
)
Income taxes
2,829
(44,080
)
Other
(1,609
)
(4,549
)
Net cash provided by (used in) operating activities
948,016
1,317,544
Cash flows from investing activities: Purchases of
property and equipment
(658,784
)
(518,466
)
Proceeds from sales of property and equipment
2,166
1,805
Net cash provided by (used in) investing activities
(656,618
)
(516,661
)
Cash flows from financing activities: Repayments of
long-term obligations
(4,696
)
(2,936
)
Net increase (decrease) in commercial paper outstanding
1,041,233
18,400
Repurchases of common stock
(1,095,396
)
(1,700,148
)
Payments of cash dividends
(249,462
)
(198,107
)
Other equity and related transactions
(1,643
)
18,997
Net cash provided by (used in) financing activities
(309,964
)
(1,863,794
)
Net increase (decrease) in cash and cash equivalents
(18,566
)
(1,062,911
)
Cash and cash equivalents, beginning of period
344,829
1,376,577
Cash and cash equivalents, end of period
$
326,263
$
313,666
Supplemental cash flow information: Cash paid
for: Interest
$
81,120
$
79,054
Income taxes
$
261,935
$
336,100
Supplemental schedule of non-cash investing and financing
activities: Right of use assets obtained in exchange for new
operating lease liabilities
$
843,900
$
893,773
Purchases of property and equipment awaiting processing for
payment, included in Accounts payable
$
139,023
$
119,336
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES Selected
Additional Information (Unaudited) Sales by
Category (in thousands)
For the Quarter Ended
July 29
July 30
2022
2021
% Change
Consumables
$
7,475,839
$
6,612,950
13.0
%
Seasonal
1,086,904
1,090,311
-0.3
%
Home products
559,766
561,190
-0.3
%
Apparel
303,204
385,747
-21.4
%
Net sales
$
9,425,713
$
8,650,198
9.0
%
For the 26 Weeks Ended
July 29
July 30
2022
2021
% Change
Consumables
$
14,436,340
$
12,991,085
11.1
%
Seasonal
2,048,282
2,140,693
-4.3
%
Home products
1,099,588
1,132,505
-2.9
%
Apparel
592,855
786,879
-24.7
%
Net sales
$
18,177,065
$
17,051,162
6.6
%
Store Activity
For the 26 Weeks Ended
July 29
July 30
2022
2021
Beginning store count
18,130
17,177
New store openings
466
530
Store closings
(30
)
(24
)
Net new stores
436
506
Ending store count
18,566
17,683
Total selling square footage (000's)
138,286
130,901
Growth rate (square footage)
5.6
%
5.9
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220825005072/en/
Investor Contacts: Donny Lau, (615) 855-5591 Kevin Walker, (615)
855-4954
Media Contacts: Jennifer Moreau, (877) 944-3477 Crystal Luce,
(615) 855-5210
Dollar General (NYSE:DG)
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