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GOODLETTSVILLE, Tenn. – Dollar General Corp. today said net sales increased 6.8% in its first quarter. Same-store sales were up 1.6%.
Operating profit declined slightly, to $740.9 million, and diluted earnings per share declined 2.9% to $2.34 as the retailer confronted a macroeconomic environment that was “more challenging than expected,” according to Jeff Owen, Dollar General’s chief executive officer.
Economic pressures, particularly as they impinge on DG’s core customer, are expected to persist in the near term and to impact the company’s full-year sales and earnings, Owen said in reporting financial results for the 13 weeks to May 5. But Dollar General remains confident in its ability to deliver strong growth in the years ahead, Owen said.
“Looking ahead, we feel good about our position, and are taking action to better serve our core customer, which is our most important calling at Dollar General,” he said. “Overall, we remain well positioned to serve all of our customers with our unique combination of value and convenience, while also creating long-term shareholder value.”
Added Owen, “We are controlling what we can control and have made significant progress improving our execution on multiple fronts, including on our supply chain recovery efforts and enhancements to the customer experience with our previously announced investment in incremental labor hours. In addition, we executed more than 800 real estate projects, including new store openings in our larger footprint Dollar General formats, which continue to outperform our expectations, and drive higher sales productivity compared to our traditional stores.”
Dollar General said the net sales increase in the quarter was primarily driven by contributions from new stores and growth in same-store sales, partially offset by the impact of store closures.
The same-store sales increase was driven by an increase in average transaction amount, partially offset by a decrease in customer traffic. Same-store sales included growth in the consumables category, partially offset by declines in each of the seasonal, home, and apparel categories.
Gross profit as a percentage of net sales was 31.6% in the first quarter of 2023 compared to 31.3% in the first quarter of 2022, an increase of 34 basis points. This was primarily attributable to higher inventory markups, decreased transportation costs, and a decreased LIFO provision; partially offset by increased shrink, markdowns, and inventory damages, as well as a greater proportion of sales coming from the consumables category, which generally has a lower gross profit rate than other product categories.
Dollar General budgeted $363 million for additions to property and equipment in the first quarter, a sum that includes money spent on information systems upgrades and other technology-related projects, as well as outlays for improvements, upgrades, remodels and relocations of existing stores. The company opened 212 new stores, remodeled 582 stores, and relocated 22 stores during the period.
The company said it did not repurchase any shares under its share repurchase program in the first quarter, a period that ended with a remaining authorization of $1.4 billion for future repurchases.
The board on May 30 declared a quarterly cash dividend of 59 cents per share of common stock, and reiterated its intention to continue making regular cash dividend payouts.
Dollar General’s revised full-year outlook reflects what management calls “more challenging macroeconomic headwinds.” The company now foresees net sales growth in the range of 3.5% to 5%, compared to its previous expectation of 5.5% to 6%.
The revised full-year projection for same-store sales anticipates growth of 1% to 2%, compared with the earlier expectation of 3% to 3.5%.
Full-year capital expenditures, including those related to investments in the company’s strategic initiatives, are projected to range from between $1.6 billion and $1.7 billion, compared to its previous expectation of $1.8 billion to $1.9 billion.
Dollar General is reducing the number of expected openings in its pOpshelf format, part of a fiscal 2023 real estate program that now anticipates 3,110 real estate projects in the United States, including 990 new store openings, 2,000 remodels, and 120 store relocations. This is compared to the previous expectation of 3,170 real estate projects in fiscal 2023, including 1,050 new store openings, 2,000 remodels, and 120 store relocations.
