Dollar General Corporation Reports Second Quarter 2022 Results

GOODLETTSVILLE, Tenn. – August 25, 2022 – Dollar General Corporation (NYSE: DG) today reported financial results for its fiscal year 2022 second quarter (13 weeks) ended July 29, 2022.  
 

 
“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:

   
The Company continues to expect the following:

   
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 opening, 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.

 The entire press release including accompanying tables is available by clicking here
 
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:

   
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.
 
Investor Contacts:
Donny Lau                         (615) 855-5591
Kevin Walker                     (615) 855-4954
 
Media Contacts:
Jennifer Moreau               (877) 944-3477
Crystal Luce                       (615) 855-5210