Dollar General (DG) raises sales forecast on inflation
By Daniel Tyson
15:53, 2 December 2021
Discount retailer Dollar General lifted its yearly sales forecast Thursday after reporting better-than-expected third quarter earnings as shoppers sought bargains amid a 30-year high consumer price inflation rate.
Consumer prices rose 6.2% over the last 12 months to October, the largest increase since 1990 the Labor Department reported last month.
Dollar General’s upward earnings forecast wasn't enough to buoy the stock. At 10:00 ET (UTC-5) shares were down more than 3% to $215.81. The 52-week high of $239.35 came on 11 August 2021. The low traded was $173.50 on 18 March 2021.
New stores drive revenue
Group revenues for the three months ended 29 October jumped 3.9% from last year to $8.5bn (£6.3bn), matching analysts' estimates of $8.495bn. Same-store sales fell 0.6% from Q3 2020, but were up 11.6% from 2019 levels.
During a conference call CEO Todd Vasos explained the increase in net sales was driven mainly by new stores. The new stores, he said, helped offset shrinking sales at established locations. In recent years, Dollar General has been on a building spree, constructing stores in rural areas.
For the 2021 fiscal year, Dollar General forecast net sales rising between 1% and 1.5%, a slight boost from its prior range of +0.5% to +1.5%, with same store sales declining between 2.5% and 3%.
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Earnings top Wall Street expectations
The chain said third quarter diluted earnings were $2.08 per share, down 10% from the same period last year, but $0.07 higher than Wall Street’s expectation. Third quarter net income dropped more than 15% from a year ago to $487m.
At the end of Q3, merchandise inventories stood at $5.3bn, down from $5bn last year. Dollar General said supply chain issues, including cargo container shortages, shipping waits and trucking issues, led to the decline.
Expansion plans
The Goodlettsville, Tennessee-based retailer is expanding its demographics. By 2025, it plans to triple its Popshelf locations to more than 1,000 Popshelf stores aimed at younger, wealthier suburban shoppers.
Vasos said Dollar General is going international. By late 2022, the retailer plans to open 10 stores in Mexico. The move, he said, will help “lay the foundation for future growth.”
During Q3 2021, the company opened 268 new stores, remodelled 486 existing locations and relocated 24 other stores.
Dollar General operated 17,915 stores in 46 states as of 29 October.
For fiscal year 2022, the company plans to execute 2,980 real estate projects, including 1,110 new store openings, 1,750 remodels, and 120 store relocations.
More share buybacks
On 30 November 30, 2021, the company's board greenlighted a quarterly cash dividend of $0.42 per share, payable on or before 18 January 2022 to shareholders of record on 4 January 2022.
In December, the company's Board increased the authorisation under the share repurchase programme by $2bn. The company plans to repurchase $2.4bn shares.
Read more: Dollar General, Dollar Tree drop amidst supply chain fears
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