Dollar General Corporation Reports Second Quarter 2021 Results

GOODLETTSVILLE, Tenn. – August 26, 2021 – Dollar General Corporation (NYSE: DG) today reported financial results for its fiscal year 2021 second quarter (13 weeks) ended July 30, 2021.  
1 Same-store sales on a two-year stack basis represents the sum of the Q2 2021 same-store sales decrease and the Q2 2020 same-store sales increase.
2 See Reconciliation of Non-GAAP Adjusted Diluted Earnings Per Share for reconciliation of Q2 2019 Adjusted Diluted EPS to Q2 2019 Diluted EPS; see also “Non-GAAP Disclosure” herein.
 
“We are pleased with our second quarter results, and remain grateful to our associates for their dedication to fulfilling our mission of Serving Others,” said Todd Vasos, Dollar General’s chief executive officer. “Despite what remains a challenging operating environment, including additional uncertainties brought on by the Delta variant and pressures on the global supply chain, our team has continued to successfully adapt and deliver for our customers.”
 
“During the quarter, we made significant progress on many key initiatives, including the completion of our initial rollout of DG Fresh and the opening of our first pOpshelf store-within-a-store concept. In addition, we executed more than 750 real estate projects, including new store openings in our pOpshelf concept and larger footprint Dollar General formats. We remain focused on delivering value and convenience for our customers, while driving long-term sustainable growth and value for our shareholders. We feel very good about the underlying strength of the business, and we are excited about our plans for the second half of fiscal 2021.”
 
Second Quarter 2021 Highlights
Net sales decreased 0.4% to $8.7 billion in the second quarter of 2021 compared to $8.7 billion in the second quarter of 2020. The net sales decrease was primarily driven by a decline in same-store sales, as well as the impact of store closures, partially offset by positive sales contributions from new stores. Same-store sales decreased 4.7% compared to the second quarter of 2020, driven by a decline in customer traffic, partially offset by an increase in average transaction amount. Same-store sales in the second quarter of 2021 included a decline in each of the consumables, seasonal, apparel, and home products categories.
 
Gross profit as a percentage of net sales was 31.6% in the second quarter of 2021 compared to 32.5% in the second quarter of 2020, a decrease of 80 basis points. This gross profit rate decrease was primarily attributable to increased transportation costs, an increased LIFO provision, a greater proportion of sales coming from the consumables category, which generally has a lower gross profit rate than other product categories, and an increase in inventory damages. These factors were partially offset by higher inventory markups and a reduction in inventory shrink as a percentage of net sales.
 
Selling, general and administrative expenses (“SG&A”) as a percentage of net sales were 21.8% in the second quarter of 2021 compared to 20.4% in the second quarter of 2020, an increase of 138 basis points. Among the expenses that were greater as a percentage of net sales in the current year period were retail labor, store occupancy costs, employee benefits, depreciation and amortization, utilities, workers’ compensation and general liability expenses, and taxes and licenses, partially offset by lower incentive compensation expense.
 
Operating profit for the second quarter of 2021 decreased 18.5% to $849.6 million compared to $1.0 billion in the second quarter of 2020. The second quarter of 2020 included approximately $38 million of incremental investments the Company made in response to the COVID-19 pandemic, primarily driven by $13 million in frontline employee appreciation bonuses, as well as measures taken to further protect the health and safety of employees and customers.
 
The effective income tax rate in the second quarter of 2021 was 21.4% compared to 21.5% in the second quarter of 2020. This lower effective income tax rate was primarily due to a greater impact of permanent differences resulting from a decrease in pre-tax income for the 2021 period compared to the 2020 period.
 
The Company reported net income of $637.0 million for the second quarter of 2021, a decrease of 19.1% compared to $787.6 million in the second quarter of 2020. Diluted EPS decreased 13.8% to $2.69 for the second quarter of 2021 compared to diluted EPS of $3.12 in the second quarter of 2020.
 
Merchandise Inventories
As of July 30, 2021, total merchandise inventories, at cost, were $5.3 billion compared to $4.4 billion as of July 31, 2020, an increase of 13.7% on a per-store basis. This increase compares to a 5.9% decrease in merchandise inventories, at cost, on a per-store basis in the second quarter of 2020.
 
Capital Expenditures
Total additions to property and equipment in the 26-week period ended July 30, 2021 were $518 million, including approximately: $248 million for improvements, upgrades, remodels and relocations of existing stores; $126 million for distribution and transportation related projects; $125 million for store facilities, primarily for leasehold improvements as well as fixtures and equipment in new stores; and $19 million for information systems upgrades and technology-related projects. During the second quarter of 2021, the Company opened 270 new stores, remodeled 477 stores and relocated 25 stores.
 
Share Repurchases
In the second quarter of 2021, the Company repurchased $700 million of its common stock, or 3.3 million shares, at an average price of $211.44 per share, under its share repurchase program. The total remaining authorization for future repurchases was $979 million at the end of the second quarter of 2021. 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 25, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.42 per share on the Company’s common stock, payable on or before October 19, 2021 to shareholders of record on October 5, 2021. 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 2021 Financial Guidance and Store Growth Outlook
Significant uncertainty continues to exist regarding the severity and duration of the COVID-19 pandemic, including its impact on the U.S. economy, consumer behavior and the Company’s business, which makes it difficult for the Company to predict specific financial outcomes for the fiscal year ending January 28, 2022 (“fiscal year 2021”). In addition, such outcomes could be impacted by several variables, which include, but are not limited to, any additional government stimulus payments, economic recovery, employment levels, COVID-19 vaccine status, further disruptions to the global supply chain, and the ongoing impact of the COVID-19 pandemic, including new variants of concern and any corresponding governmental measures such as closures of schools or businesses.

Despite this uncertainty and an expected increase in transportation and distribution costs for the remainder of fiscal 2021, the Company is updating its financial guidance issued on May 27, 2021 as a result of its strong results in the first half of the year.
 
For fiscal year 2021, the Company now expects the following:  
In addition, the Company is reiterating its plans to execute 2,900 real estate projects in fiscal year 2021, including 1,050 new store openings, 1,750 store remodels, and 100 store relocations.
 
3 Same-store sales on a two-year stack basis represents the sum of actual 2020 same-store sales and the corresponding low and high ends of the 2021 guidance range.  
4 Two-year compound annual growth rates utilize 2019 diluted EPS and 2019 Adjusted diluted EPS (see “Non-GAAP Disclosure” herein) as the base.
 
Conference Call Information
The Company will hold a conference call on August 26, 2021 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 13720935. 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 23, 2021, and will be accessible via webcast replay or by calling (877) 660-6853. The conference ID for the telephonic replay is 13720935.
 
Non-GAAP Disclosure
Adjusted diluted EPS, and its respective growth metric, for the 2019 second quarter ended August 2, 2019, and fiscal year ended January 31, 2020 has not been derived in accordance with U.S. GAAP, but rather excludes the impact of significant legal expenses associated with wage and hour and consumer/product certified class action litigation and related matters. Due to the nature, infrequency, and financial magnitude of such matters, the Company believes this non-GAAP financial measure provides useful information to investors in assessing the Company’s operating performance as this measure provides an additional relevant comparison of the Company’s operating performance across periods. A reconciliation of this non-GAAP measure to the most directly comparable measure calculated in accordance with GAAP is provided in the accompanying schedules.
 
The non-GAAP measure discussed above is not a measure of financial performance or condition, liquidity or profitability in accordance with GAAP, and should not be considered as an alternative to diluted EPS or any other measure derived in accordance with GAAP. This non-GAAP measure has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company’s financial results as reported in accordance with GAAP. Because not all companies use identical calculations, this presentation may not be comparable to other similarly titled measures of other companies.
 
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 2021 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,” “expect,” “estimate,” “forecast,” “predict,” “position,” “assume,” “opportunities,” “intend,” “continue,” “future,” “ongoing,” “potential,” “long-term,” “guidance,” “goal,” “outcome,” “uncertainty,” “look to,” “looking ahead,” “subject to,” “committed,” “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:  
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.

The entire press release including accompanying tables is available by clicking here.
 
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 17,683 stores in 46 states as of July 30, 2021. 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. 
 
Investor Contacts:
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