Dollar General Profit Meets View, But Sales Miss; Outlook Weak

(RTTNews) - Discount retailer Dollar General Corp. (DG) reported Thursday a higher fourth quarter profit on increased sales, as customer traffic picked up despite harsh winter weather.

Earnings per share matched analysts' expectations, although quarterly revenues missed their estimates.

The company also provided earnings and sales growth guidance for the first quarter and full-year 2014, all below Street view.

"Sales in the fourth quarter were impacted by severe winter weather, including many days with significant store closures, an aggressive competitive retail landscape and our customers' uncertainty about spending in the current economic environment. In spite of these headwinds, both customer traffic and average ticket increased in our same-stores in the fourth quarter," Chairman and CEO Rick Dreiling said in a statement.

Goodlettsville, Tennesse-based Dollar General reported net income of $322.17 million or $1.01 per share for the fourth quarter, higher than 317.42 million or $0.97 per share in the prior-year quarter.

On average, 24 analysts polled by Thomson Reuters expected the company to report earnings of $1.01 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter grew 6.8 percent to $4.49 billion from $4.21 billion in the same quarter last year, but missed twenty-three Wall Street analysts' consensus estimate of $4.62 billion.

Same-store sales for the quarter improved 1.3 percent, with increases in both customer traffic and average transaction value as well as sales of tobacco products and perishables.

Operating margin for the quarter contracted 44 basis points to 11.97 percent from last year.

"Although some of the severe weather impact has continued into the first quarter, we are pleased with our sales performance on days when weather is more normalized," Dreiling noted.

Looking ahead to the first quarter, the company expects earnings in a range of $0.72 to $0.74 per share, on projected total sales growth of 7 to 8 percent and same-stores sales growth of 2 to 3 percent. Analysts expect the company to report earnings of $0.81 per share and quarterly revenue growth of 10 percent to $4.66 billion.

For the fiscal 2014, Dollar General forecasts earnings in the range of $3.45 to $3.55 per share, on projected total sales growth of 8 to 9 percent and same-store sales growth of 3 to 4 percent. Street is currently looking for full-year 2014 earnings of $3.69 per share on annual revenue growth of 9.4 percent to $19.29 billion.

The company also said it currently plans to open about 700 new stores in fiscal 2014, and projects capital expenditures in the range of $450 million to $500 million.

"While we remain cautious on the current operating environment and the many challenges our customer is facing in 2014, we have a business model that generates significant cash flow, putting us in a position to invest in these growth opportunities, while continuing to return cash to shareholders through share repurchases," Dreiling added.

DG closed Wednesday's regular trading session at $59.29, up $0.20 on a volume of 4.14 million shares. In the past 52-week period, the stock has been trading in a range of $47.46 to $62.93.