Dollar General Q1 Profit Tops View, But Sales Miss; Backs 2015 Outlook

(RTTNews) - Discount retailer Dollar General Corp. (DG) reported Tuesday a profit for the first quarter that increased from last year, reflecting improved margins and higher sales at established stores amid increased customer traffic and average transaction value.

Earnings per share topped analysts' expectations, while quarterly sales missed their estimates by a whisker. The company also reaffirmed its earnings and sales growth guidance for full year 2015.

"In the first quarter, we made solid progress implementing our key initiatives with balanced growth across both consumables and non-consumable categories. Compared to the first quarter of 2014, same-store sales improved 3.7% and gross margin expanded by 45 basis points, contributing to diluted EPS growth of 17%," Chairman and CEO Rick Dreiling said.

Goodlettsville, Tennesse-based Dollar General reported net income of $253.24 million or $0.84 per share for the first quarter, higher than $222.40 million or $0.72 per share in the prior-year quarter.

On average, 25 analysts polled by Thomson Reuters expected the company to report earnings of $0.81 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter grew 8.8 percent to $4.92 billion from $4.52 billion in the same quarter last year, but missed twenty-three Wall Street analysts' consensus estimate of $4.94 billion.

Same-store sales for the quarter improved 3.7 percent, with increases in both customer traffic and average transaction value as well as growth in consumables business amid increased sales volume of tobacco products, perishables, health care items, and candy and snacks.

Consumables sales grew 9 percent to $3.75 billion, and seasonal sales increased 8.3 percent to $586 million from the year-ago quarter.

Home products sales improved 6.9 percent to $303 million, and apparel sales advanced 9.5 percent to $275 million from the prior-year quarter.

Operating margin for the quarter improved 31 basis points to 8.71 percent from last year as gross margin expanded 45 basis points amid higher initial inventory markups, an improved inventory shrink rate and lower transportation costs.

Looking ahead to fiscal 2015, Dollar General continues to expect earnings in the range of $3.85 to $3.95 per share, on projected total sales growth of 8 to 9 percent and same-store sales growth of 3 to 3.5 percent. Street is currently looking for full-year 2015 earnings of $3.94 per share on annual sales growth of 8.5 percent to $20.51 billion.

The company also still plans to open about 730 new stores in fiscal 2015, or 6 percent square footage growth, and relocate or remodel 875 stores. It projects capital expenditures in the range of $500 million to $550 million.

Further, Dollar General said it is on track with its pipeline development to accelerate new store openings to 7 percent square footage growth in 2016.

"Dollar General is well-positioned to win with our customers as we continue to invest in growing our business. We are executing on our plan to deliver increased value to our shareholders by capitalizing on growth opportunities and returning capital to our shareholders through share repurchases and anticipated regular quarterly dividends," Dreiling added.

DG closed Monday's regular trading session at $72.81, up $0.07 on a volume of 3.40 million shares. In the past 52-week period, the stock has been trading in a range of $53.78 to $76.99.