Dollar General Corporation
Aug 27, 2015

Dollar General Corporation Reports Second Quarter 2015 Financial Results

GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)-- Dollar General Corporation (NYSE: DG) today reported financial results for its fiscal 2015 second quarter (13 weeks) ended July 31, 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," said Todd Vasos, Dollar General's chief executive officer.

"With new leadership in place for store operations and merchandising, we are well positioned to execute our key initiatives to drive topline growth over time. 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," said Vasos.

Second Quarter 2015 Highlights

The Company's net income was $282 million, or $0.95 per diluted share, in the 2015 second quarter, compared to net income of $251 million, or $0.83 per diluted share, in the 2014 second quarter.

Net sales increased 7.9 percent to $5.10 billion in the 2015 second quarter compared to $4.72 billion in the 2014 second quarter. Same-store sales increased 2.8 percent, with increases in both customer traffic and average transaction value. The remainder of the sales increase was attributable to new stores, partially offset by closed stores. All categories delivered positive same-store sales growth. Growth in consumables was driven by candy and snacks, tobacco products and perishables. Within non-consumables, the most significant growth was due to seasonal items, sundries, hardware and housewares.

Gross profit, as a percentage of net sales, was 31.2 percent in the 2015 second quarter, an increase of 36 basis points from the 2014 second quarter. The gross profit rate increase was primarily attributable to higher initial inventory markups, an improved inventory shrink rate and lower transportation costs, partially offset by increased markdowns.

Selling, general and administrative expense ("SG&A") as a percentage of net sales was 21.8 percent in the 2015 second quarter compared to 21.7 percent in the 2014 second quarter, an increase of nine basis points. The SG&A increase was primarily attributable to higher store asset impairments, incentive compensation, repairs and maintenance, and fees associated with the increased use of debit cards. Partially offsetting these items was a higher volume of cash back transactions resulting in increased convenience fees collected from customers.

The effective income tax rate was 38.0 percent for the 2015 second quarter compared to a rate of 38.1 percent for the 2014 second quarter.

26-Week Period Highlights

For the 26-week period ended July 31, 2015, net sales increased 8.3 percent over the comparable 2014 period to $10.0 billion. Same-store sales increased 3.3 percent. Increases in customer traffic and average transaction amount contributed to the increase in same-store sales. The remainder of the sales increase was attributable to new stores, partially offset by closed stores.

Gross profit increased by 9.7 percent and, as a percentage of net sales, increased by 39 basis points to 30.8 percent in the 2015 26-week period compared to the 2014 period. The gross profit rate increase in the 2015 period as compared to the 2014 period was primarily attributable to higher initial inventory markups, lower transportation costs and an improved inventory shrink rate.

SG&A was 21.8 percent of net sales in the 2015 period compared to 21.7 percent in the 2014 period, an increase of 11 basis points. The SG&A increase was primarily attributable to higher incentive compensation, repairs and maintenance, fees associated with the increased use of debit cards, and an increase in store asset impairments. Partially offsetting these items was a higher volume of cash back transactions resulting in increased convenience fees collected from customers.

The effective income tax rate for the 2015 period was 37.8 percent compared to a rate of 38.0 percent for the 2014 period.

For the 26-week 2015 period, the Company reported net income of $536 million, or $1.79 per diluted share, compared to net income of $474 million, or $1.54 per diluted share, for the 26-week 2014 period.

Merchandise Inventories

As of July 31, 2015, total merchandise inventories, at cost, were $3.03 billion compared to $2.79 billion as of August 1, 2014, an increase of 2.7 percent on a per-store basis.

Capital Expenditures

During the 26-week period, the Company opened 428 new stores and remodeled or relocated 593 stores. Total additions to property and equipment in the 26-week period ended July 31, 2015 were $247 million, including: $95 million for improvements, upgrades, remodels and relocations of existing stores; $55 million for distribution and transportation-related capital expenditures; $53 million related to new leased stores, primarily for leasehold improvements, fixtures and equipment; $24 million for stores built by the Company; and $18 million for information systems upgrades and technology-related projects.

Share Repurchases

During the 2015 second quarter, the Company repurchased 2.6 million shares of its common stock at a total cost of $199.7 million, at an average price of $77.84 per share. For the 2015 26-week period, the Company repurchased 9.7 million shares of its common stock under the share repurchase program at a total cost of $734.3 million, at an average price of $76.03 per share. Since the inception of the share repurchase program in December 2011, the Company has repurchased 54.1 million shares totaling $3.0 billion, at an average price of $55.64 per share. The Company has a total remaining authorization under the share repurchase program of approximately $489 million at August 26, 2015.

Fiscal 2015 Financial Outlook

For the 2015 fiscal year, the Company is reconfirming its financial guidance provided on June 2, 2015. Total sales are expected to increase 8 to 9 percent over the 2014 fiscal year, with same-store sales expected to increase 3 to 3.5 percent. Operating profit for 2015 is expected to increase 7 to 9 percent over the 2014 adjusted operating profit. Diluted EPS for the fiscal year is expected to be approximately $3.85 to $3.95. Considering sales performance to date and the current operating environment, management expectations are that same-store sales likely will be closer to the low-end of the range.

Capital expenditures are expected to be in the range of $500 million to $550 million in 2015. Dollar General plans to open approximately 730 new stores in 2015, or 6 percent square footage growth, and relocate or remodel 875 stores. To date, the Company is on track with its pipeline development to accelerate new store openings to 7 percent square footage growth in 2016.

Conference Call Information

The Company will hold a conference call on Thursday, August 27, 2015 at 9:00 a.m. CT/10:00 a.m. ET, hosted by Todd Vasos, chief executive officer, and John Garratt, interim chief financial officer. If you wish to participate, please call (855) 576-2641 at least 10 minutes before the conference call is scheduled to begin. The conference ID is 89003506. The call will also be broadcast live online at www.dollargeneral.com under "Investor Information, Conference Calls and Investor Events." A replay of the conference call will be available through Thursday, September 10, 2015, and will be accessible online or by calling (855) 859-2056. The conference ID for the replay is 38432761.

Forward-Looking Statements

This press release contains forward-looking information, such as the information in the section entitled "Fiscal 2015 Financial Outlook" as well as other statements regarding the Company's outlook, plans and intentions, including, but not limited to, statements made within the quotations of Mr. Vasos. A reader can identify forward-looking statements because they are not limited to historical fact or they use words such as "outlook," "may," "should," "could," "believe," "anticipate," "plan," "expect," "estimate," "forecast," "goal," "prospect," "positioned," "accelerate," "intend," "committed," "continue," "looking ahead," "over time" or "will likely result," and similar expressions that concern the Company's strategy, plans, intentions or beliefs about future occurrences or results. These matters involve risks, uncertainties and other factors that may cause the actual performance of the Company to differ materially from that 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 the Company's 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 to update or revise any forward-looking statements to reflect events or circumstances arising after the date on which they were made, 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.

About Dollar General Corporation

Dollar General Corporation has been delivering value to shoppers for over 75 years. Dollar General helps shoppers Save time. Save money. Every day!® by offering products that are frequently used and replenished, such as food, snacks, health and beauty aids, cleaning supplies, basic apparel, house wares and seasonal items at low everyday prices in convenient neighborhood locations. Dollar General operates 12,198 stores in 43 states as of July 31, 2015. In addition to high quality private brands, Dollar General sells products from America's most-trusted manufacturers such as Clorox, Energizer, Procter & Gamble, Hanes, Coca-Cola, Mars, Unilever, Nestle, Kimberly-Clark, Kellogg's, General Mills, and PepsiCo. For more information on Dollar General, please visit www.dollargeneral.com.

 
 
 
 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
             
(Unaudited)
July 31 August 1 January 30
2015     2014     2015
ASSETS
Current assets:
Cash and cash equivalents $ 180,525 $ 172,474 $ 579,823
Merchandise inventories 3,029,731 2,788,872 2,782,521
Income taxes receivable 14,646 4,237 -
Prepaid expenses and other current assets         199,945         175,048         170,265  
Total current assets         3,424,847         3,140,631         3,532,609  
Net property and equipment         2,195,857         2,106,963         2,116,075  
Goodwill         4,338,589         4,338,589         4,338,589  
Other intangible assets, net         1,201,241         1,203,904         1,201,870  
Other assets, net         34,661         35,707         34,961  
Total assets       $ 11,195,195       $ 10,825,794       $ 11,224,104  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 101,335 $ 101,013 $ 101,158
Accounts payable 1,536,610 1,395,780 1,388,154
Accrued expenses and other 443,164 427,269 413,760
Income taxes payable 41,348 23,922 59,400
Deferred income taxes         32,306         21,434         25,268  
Total current liabilities         2,154,763         1,969,418         1,987,740  
Long-term obligations         2,761,794         2,881,217         2,639,427  
Deferred income taxes         578,084         582,883         601,590  
Other liabilities         281,620         296,283         285,309  
Total liabilities         5,776,261         5,729,801         5,514,066  
 
Commitments and contingencies
 
Shareholders' equity:
Preferred stock - - -
Common stock 257,968 265,458 265,514
Additional paid-in capital 3,085,637 3,027,985 3,048,806
Retained earnings 2,081,543 1,811,358 2,403,045
Accumulated other comprehensive loss         (6,214 )       (8,808 )       (7,327 )
Total shareholders' equity         5,418,934         5,095,993         5,710,038  
Total liabilities and shareholders' equity       $ 11,195,195       $ 10,825,794       $ 11,224,104  

 
 
 
 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
                 
For the Quarter (13 Weeks) Ended
July 31 % of Net August 1 % of Net
2015     Sales     2014     Sales
Net sales $ 5,095,904 100.00 % $ 4,724,039 100.00 %
Cost of goods sold         3,507,749     68.83         3,268,465     69.19  
Gross profit 1,588,155 31.17 1,455,574 30.81
Selling, general and administrative expenses         1,112,343     21.83         1,027,048     21.74  
Operating profit 475,812 9.34 428,526 9.07
Interest expense         20,699     0.41         22,598     0.48  
Income before income taxes 455,113 8.93 405,928 8.59
Income tax expense         172,764     3.39         154,668     3.27  
Net income       $ 282,349     5.54 %     $ 251,260     5.32 %
 
Earnings per share:
Basic $ 0.95 $ 0.83
Diluted $ 0.95 $ 0.83
Weighted average shares outstanding:
Basic 295,679 303,015
Diluted 296,528 303,888
 
 
 
For the 26 Weeks Ended
July 31 % of Net August 1 % of Net
2015     Sales     2014     Sales
Net sales $ 10,014,576 100.00 % $ 9,246,120 100.00 %
Cost of goods sold         6,927,716     69.18         6,432,800     69.57  
Gross profit 3,086,860 30.82 2,813,320 30.43
Selling, general and administrative expenses         2,182,854     21.80         2,005,086     21.69  
Operating profit 904,006 9.03 808,234 8.74
Interest expense         42,275     0.42         44,865     0.49  
Income before income taxes 861,731 8.60 763,369 8.26
Income tax expense         326,147     3.26         289,711     3.13  
Net income       $ 535,584     5.35 %     $ 473,658     5.12 %
 
Earnings per share:
Basic $ 1.79 $ 1.55
Diluted $ 1.79 $ 1.54
Weighted average shares outstanding:
Basic 298,440 306,173
Diluted 299,308 307,091

 
 
 
 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
             
For the 26 Weeks Ended
July 31 August 1
2015       2014
Cash flows from operating activities:
Net income $ 535,584 $ 473,658

Adjustments to reconcile net income to net cash from operating activities:

Depreciation and amortization 174,734 169,498
Deferred income taxes (32,680 ) (38,880 )
Tax benefit of share-based awards (27,929 ) (10,994 )
Noncash share-based compensation 19,642 18,320
Other noncash (gains) and losses 7,734 3,539
Change in operating assets and liabilities:
Merchandise inventories (246,793 ) (235,890 )
Prepaid expenses and other current assets (30,754 ) (29,055 )
Accounts payable 133,615 104,382
Accrued expenses and other liabilities 29,237 61,977
Income taxes (4,769 ) (28,469 )
Other           (569 )         (1,162 )
Net cash provided by (used in) operating activities           557,052           486,924  
 
Cash flows from investing activities:
Purchases of property and equipment (247,051 ) (191,414 )
Proceeds from sales of property and equipment           257           692  
Net cash provided by (used in) investing activities           (246,794 )         (190,722 )
 
Cash flows from financing activities:
Repayments of long-term obligations (50,605 ) (26,672 )
Borrowings under revolving credit facilities 445,100 972,000
Repayments of borrowings under revolving credit facilities (272,100 ) (782,000 )
Repurchases of common stock (734,334 ) (800,095 )
Payments of cash dividends (131,204 ) -
Other equity and related transactions 5,658 (3,521 )
Tax benefit of share-based awards           27,929           10,994  
Net cash provided by (used in) financing activities           (709,556 )         (629,294 )
 
Net increase (decrease) in cash and cash equivalents (399,298 ) (333,092 )
Cash and cash equivalents, beginning of period           579,823           505,566  
Cash and cash equivalents, end of period         $ 180,525         $ 172,474  
 
Supplemental cash flow information:
Cash paid for:
Interest $ 39,539 $ 41,672
Income taxes $ 363,204 $ 359,450
Supplemental schedule of non-cash investing and financing activities:

Purchases of property and equipment awaiting processing for payment, included in Accounts payable

$ 46,427 $ 31,996

 
 
 
 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Selected Additional Information
(Unaudited)
 
 
Sales by Category (in thousands)
                           
For the Quarter (13 Weeks) Ended
July 31 August 1
2015         2014 % Change
Consumables $ 3,867,635 $ 3,576,189 8.1 %
Seasonal 642,525 593,596 8.2 %
Home products 304,305 285,428 6.6 %
Apparel   281,439           268,826   4.7 %
Net sales $ 5,095,904         $ 4,724,039   7.9 %
 
 
For the 26 Weeks Ended
July 31 August 1
2015         2014 % Change
Consumables $ 7,621,613 $ 7,021,654 8.5 %
Seasonal 1,228,818 1,135,028 8.3 %
Home products 607,329 569,025 6.7 %
Apparel   556,816           520,413   7.0 %
Net sales $ 10,014,576         $ 9,246,120   8.3 %
 
 
 
Store Activity
 
For the 26 Weeks Ended
July 31 August 1
2015       2014
 
Beginning store count 11,789 11,132
New store openings 428 426
Store closings   (19 )       (23 )
Net new stores   409         403  
Ending store count   12,198         11,535  
Total selling square footage (000's)   90,305         85,168  
Growth rate (square footage)   6.0 %       6.6 %
 
 

Dollar General Corporation
Investor Contacts:
Mary Winn Pilkington, 615-855-5536
Matt Hancock, 615-855-4811
or
Media Contact:
Dan MacDonald, 615-855-5209

Source: Dollar General Corporation

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