Dollar General Corporation Reports First Quarter 2023 Results
Jun 01, 2023
Updates Financial Guidance for Fiscal Year 2023
- Net Sales Increased 6.8%
- Same-Store Sales Increased 1.6%
- Operating Profit Decreased 0.7% to
- Diluted Earnings Per Share (“EPS”) Decreased 2.9% to
- Cash Flows From Operations of
- Company Updates pOpshelf Real Estate Plans for Fiscal Year 2023
- Board of Directors Declares Quarterly Cash Dividend of
“While the macroeconomic environment has been more challenging than expected, particularly for our core customer, we are confident in Dollar General’s ability to deliver strong growth in the years ahead, despite the near-term pressure which impacted our first quarter sales results and is anticipated to impact our full-year sales and EPS,” said
“We are controlling what we can control and have made significant progress improving our execution on multiple fronts, including on our supply chain recovery efforts and enhancements to the customer experience with our previously announced investment in incremental labor hours. In addition, we executed more than 800 real estate projects, including new store openings in our larger footprint
“Looking ahead, we feel good about our position, and are taking action to better serve our core customer, which is our most important calling at
First Quarter 2023 Highlights
Net sales increased 6.8% to
Gross profit as a percentage of net sales was 31.6% in the first quarter of 2023 compared to 31.3% in the first quarter of 2022, an increase of 34 basis points. This gross profit rate increase was primarily attributable to higher inventory markups, decreased transportation costs, and a decreased LIFO provision; partially offset by increased shrink, markdowns, and inventory damages, as well as a greater proportion of sales coming from the consumables category, which generally has a lower gross profit rate than other product categories.
Selling, general and administrative expenses (“SG&A”) as a percentage of net sales were 23.7% in the first quarter of 2023 compared to 22.8% in the first quarter of 2022, an increase of 94 basis points. The primary expenses that were a greater percentage of net sales in the current year period were retail labor, repairs and maintenance, and depreciation and amortization; partially offset by a decrease in incentive compensation.
Operating profit for the first quarter of 2023 decreased 0.7% to
Interest expense for the first quarter of 2023 increased 109.3% to
The effective income tax rate in both the first quarter of 2023 and the first quarter of 2022 was 21.8%. This effective income tax rate was flat due to offsetting changes driven by a lower state effective tax rate, and less benefit from stock-based compensation in the first quarter of 2023 compared to the first quarter of 2022.
The Company reported net income of
Total additions to property and equipment in the first quarter of 2023 were
Share RepurchasesIn the first quarter of 2023, as planned, the Company did not repurchase any shares under its share repurchase program. The total remaining authorization for future repurchases was
Under the program, 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, cash requirements, excess debt capacity, results of operations, financial condition and other factors. The authorization has no expiration date. Information regarding the Company’s updated share repurchase expectations for 2023 can be found under “Fiscal Year 2023 Financial Guidance and Store Growth Outlook.”
Fiscal Year 2023 Financial Guidance and Store Growth Outlook
The macroeconomic environment is more challenging than the Company had previously anticipated, which the Company believes is having a significant impact on customers’ spending levels and behaviors.
The Company remains confident in the business and its long-term growth prospects, but is revising its outlook for fiscal year 2023, provided on
- Net sales growth in the range of approximately 3.5% to 5.0%, compared to its previous expectation of 5.5% to 6%; both of which include an anticipated negative impact of approximately two percentage points due to lapping the fiscal 2022 53 week
- Same-store sales growth in the range of approximately 1.0% to 2.0%, compared to its previous expectation of 3.0% to 3.5%
- Diluted EPS in the range of an approximate 8% decline to flat, compared to its previous expectation of growth of approximately 4% to 6%, both of which include an anticipated negative impact of approximately four percentage points due to lapping the fiscal 2022 53
- The updated Diluted EPS guidance includes an anticipated negative impact of approximately four percentage points due to higher interest expense in fiscal 2023, compared to the anticipated negative impact of approximately three percentage points included in the prior EPS guidance.
- This Diluted EPS guidance assumes an effective tax rate of approximately 22.5%, compared to the previous assumption in the range of approximately 22.5% to 23.0%
- Capital expenditures, including those related to investments in the Company’s strategic initiatives, in the range of
$1.6 billionto $1.7 billion, compared to its previous expectation of $1.8 billionto $1.9 billion.
The Company’s guidance assumes no share repurchases in 2023, as compared to its previous expectation of share repurchases of approximately
The Company is reducing the number of expected new store openings in the pOpshelf format in 2023. As a result, the Company now expects to execute 3,110 real estate projects in the United States, including 990 new store openings, 2,000 remodels, and 120 store relocations. This is compared to the previous expectation of 3,170 real estate projects in fiscal 2023, including 1,050 new store openings, 2,000 remodels, and 120 store relocations.
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