Why Variety Store Chain Dollar General's Shares Are Surging Today

Dollar General Corp DG shares are trading higher after the company reported a four-quarter FY23 sales decline of 3.4% year-on-year to $9.858 billion, beating the analyst consensus estimate of $9.783 billion.

The decrease in net sales was primarily driven by the period containing one week less of sales than the prior year.

Same-store sales increased 0.7% versus last year, by an increase in customer traffic, partially offset by a decrease in average transaction amount.

The gross profit margin for the quarter decreased 138 basis points Y/Y to 29.5%. The operating margin compressed from 9.15% to 5.88%, and operating income for the quarter declined 37.9% to $579.7 million.

EPS of $1.83 beat the consensus estimate of $1.75.

The company held $537.3 million in cash and equivalents as of February 2, 2024. Operational cash flow for the year totaled $2.4 billion.

As of February 2, 2024, total merchandise inventories, at cost, were $7 billion compared to $6.8 billion as of February 3, 2023, a decrease of 1.1% on a per-store basis.

The total remaining authorization for future repurchases was $1.4 billion at the end of fiscal 2023. The company did not repurchase any shares in the fiscal year 2023.

On March 13, 2024, the company’s board declared a quarterly cash dividend of $0.59 per share on its common stock, payable on or before April 23, 2024, to shareholders of record on April 9, 2024. 

“With customer traffic growth and market share gains during the quarter, we believe our actions are resonating with customers as they turn to Dollar General for our unique combination of value and convenience,” said CEO Todd Vasos.

Outlook: Dollar General sees FY24 EPS of $6.80 – $7.55 versus an estimate of $7.55. The company expects net sales growth of 6% – 6.7% and same-store sales growth of 2% – 2.7%.

Dollar General reiterated its plans to execute approximately 2,385 real estate projects in fiscal year 2024, including approximately 800 new store openings, 1,500 remodels, and 85 store relocations.

For the 13-week quarter ending May 3, 2024, the company currently expects a same-store sales increase of 1.5% to 2.0% and EPS of $1.50-$1.60 (consensus $1.89).

Kelly Dilts, Dollar General’s chief financial officer, said, “While we anticipate the first quarter will be pressured by our lowest expected same-store-sales increase of any quarter in fiscal 2024, as well as the annualization of prior year headwinds such as retail labor and shrink, we are focused on delivering our full year plans, including anticipated strong EPS growth in the back half of the year.”

Price Action: DG shares are trading higher by 4.99% at $166.06 in premarket on the last check Thursday.

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