Dollar General Q2 Profit Tops View, But Sales Miss; Backs 2015 Outlook

(RTTNews) - Discount retailer Dollar General Corp. (DG) reported Thursday a profit for the second 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.

"Dollar General achieved strong financial performance in the second quarter. We delivered 7.9 percent sales growth, 2.8 percent same-store sales growth, robust gross margin expansion and 14 percent diluted EPS improvement over the 2014 second quarter. We also grew both customer traffic and average ticket for the 30th consecutive quarter when compared to the prior year quarter," CEO Todd Vasos said.

Goodlettsville, Tennesse-based Dollar General reported net income of $282.35 million or $0.95 per share for the second quarter, higher than $251.26 million or $0.83 per share in the prior-year quarter.

On average, 26 analysts polled by Thomson Reuters expected the company to report earnings of $0.94 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter grew 7.9 percent to $5.10 billion from $4.72 billion in the same quarter last year, but missed twenty-two Wall Street analysts' consensus estimate of $5.14 billion.

Same-store sales for the quarter improved 2.8 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. All categories delivered positive same-store sales growth.

Consumables sales grew 8.1 percent to $3.87 billion, and seasonal sales increased 8.2 percent to $643 million from the year-ago quarter.

Home products sales improved 6.6 percent to $304 million, and apparel sales advanced 4.7 percent to $281 million from the prior-year quarter.

Operating margin for the quarter improved 27 basis points to 9.34 percent from last year as gross margin expanded 36 basis points, partially offset by a nine basis points increase in selling, general and administrative expense as a percentage of net sales.

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. The Street is currently looking for full-year 2015 earnings of $3.95 per share on annual sales growth of 8.4 percent to $20.50 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.

Separately, Dollar General said its Board of Directors has declared a quarterly cash dividend of $0.22 per common share, payable on September 30 to shareholders of record at the close of business on September 16, 2015.

"Looking ahead to 2016, our team is energized to accelerate our pace of growth as we focus on providing our consumers with everyday low prices and convenient locations. We remain confident in the long-term growth prospects for Dollar General to deliver strong financial results and healthy cash returns for our shareholders," Vasos added.

In Thursday's regular trading session, DG is currently trading at $74.99, up $1.72 or 2.25% on a volume of 0.81 million shares. In the past 52-week period, the stock has been trading in a range of $57.09 to $81.42.