Why Variety Stores Chain Dollar General's Shares Are Shooting Higher Today

Dollar General Corp DG reported third-quarter FY23 sales growth of 2.4% year-on-year to $9.69 billion, beating the analyst consensus estimate of $9.65 billion.

Same-store sales decreased 1.3% versus last year, driven by a decline in average transaction amount, partially offset by an increase in customer traffic.

The gross profit margin for the quarter decreased 150 basis points Y/Y to 29%. The operating margin compressed from 7.77% to 4.47%, and operating income for the quarter declined 41.1% to $433.5 million.

The company held $365.4 million in cash and equivalents as of November 3, 2023. Year-to-date operational cash flow totaled $1.4 billion.

EPS of $1.26 beat the consensus estimate of $1.19.

As of November 3, 2023, total merchandise inventories, at cost, were $7.4 billion compared to $7.1 billion as of October 28, 2022, a decrease of 1.8% on a per-store basis.

The total remaining share authorization for future repurchases was $1.4 billion at the end of Q3 2023. The company did not repurchase any shares in the third quarter of 2023, as planned.

On December 6, 2023, the company's board declared a quarterly cash dividend of $0.59 per share on its common stock, payable on or before January 23, 2024, to shareholders of record on January 9, 2024. 

"While we are not satisfied with our financial results for the third quarter, including a significant headwind from inventory shrink, we are pleased with the momentum in some of the underlying sales trends, including positive customer traffic, as well as market share gains in both dollars and units," said CEO Todd Vasos.

Outlook Reaffirmed: Dollar General continues to expect FY23 sales growth of 1.5% to 2.5% and EPS of $7.10 to $7.60 versus an estimate of $7.45.

The company expects same-store sales growth of a decline of approximately 1% to flat.

For FY24, Dollar General plans to execute approximately 2,385 real estate projects, including approximately 800 new store openings, 1,500 remodels, and 85 store relocations.

Price Action: DG shares are trading higher by 4.46% at $139.89 in premarket on the last check Thursday.

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