On December 7, 2023, Dollar General Corp (DG, Financial) released its 8-K filing, disclosing its financial results for the third quarter of fiscal year 2023. The company reported a net sales increase of 2.4% to $9.7 billion, primarily driven by new store openings, which was somewhat offset by a 1.3% decline in same-store sales and the impact of store closures. Despite the rise in net sales, Dollar General faced significant challenges, including a sharp decrease in operating profit by 41.1% to $433.5 million and a 45.9% drop in diluted earnings per share (EPS) to $1.26.
Financial Performance Overview
The company's gross profit rate decreased by 147 basis points to 29.0%, mainly due to increased inventory shrink, lower inventory markups, and higher markdowns. Selling, general and administrative expenses (SG&A) rose by 183 basis points to 24.5% of net sales, with increased costs in several areas including retail labor and depreciation. Interest expenses also surged by 53.3% to $82.3 million, largely due to higher average borrowings and interest rates.
Despite the headwinds, CEO Todd Vasos remains optimistic, stating,
While we are not satisfied with our financial results for the third quarter, we are pleased with the momentum in some of the underlying sales trends, including positive customer traffic, as well as market share gains in both dollars and units."Vasos also highlighted the company's focus on operational excellence and future growth plans, including the announcement of the fiscal year 2024 real estate growth plan, which involves approximately 2,385 projects.
Balance Sheet and Cash Flow Highlights
As of November 3, 2023, Dollar General's total merchandise inventories decreased by 1.8% on a per-store basis to $7.4 billion. The company's capital expenditures for the 39-week period amounted to $1.2 billion, with significant investments in store improvements, distribution, and technology projects. Notably, the company did not repurchase any shares in the third quarter, leaving a remaining authorization of $1.4 billion for future repurchases.
The Board of Directors declared a quarterly cash dividend of $0.59 per share, reflecting the company's commitment to returning value to shareholders. However, the declaration and amount of future dividends will depend on various factors, including the company's financial condition and results of operations.
Looking Forward
Dollar General Corp (DG, Financial) reiterated its financial guidance for fiscal year 2023, expecting net sales growth in the range of 1.5% to 2.5% and same-store sales to be approximately flat to a 1.0% decline. The diluted EPS is projected to be in the range of approximately $7.10 to $7.60, with capital expenditures anticipated between $1.6 billion to $1.7 billion. The company also plans to execute around 3,110 real estate projects in the United States, including 990 new store openings.
For fiscal year 2024, Dollar General Corp (DG, Financial) aims to execute approximately 2,385 real estate projects, including 800 new store openings, 1,500 remodels, and 85 relocations. This plan reflects a modest slowdown compared to recent years, which the company believes is prudent in the current environment.
Investors and stakeholders can access more details about Dollar General Corp (DG, Financial)'s financial performance and future outlook by joining the conference call scheduled for December 7, 2023, or by visiting the company's investor relations website.
Explore the complete 8-K earnings release (here) from Dollar General Corp for further details.
