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GOODLETTSVILLE, Tenn. — Dollar General Corp.’s first quarter sales increased 6.8%, but its operating profit declined slightly, to $740.9 million, as the retailer confronted a macroeconomic environment that was “more challenging than expected,” said chief executive officer Jeff Owen.
Same-store sales were up 1.6% in the period ended May 5, while diluted earnings per share declined 2.9% to $2.34.
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. But Dollar General remains confident in its ability to deliver strong growth in the future, he added.
“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.
“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.”
The net sales increase was primarily driven by contributions from new outlets and growth in same-store sales, partially offset by the impact of 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 gains included growth in the consumables category, partially offset by declines in the seasonal, home and apparel categories.
Gross profit as a percentage of net sales was 31.6% 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 stores, remodeled 582 and relocated 22 during the period.
Dollar General did not repurchase any shares, ending the quarter with $1.4 billion for future repurchases.
The board on May 30 declared a quarterly dividend of 59 cents per share of common stock, and reiterated its intention to continue paying regular cash dividends.
Dollar General’s revised full-year outlook reflects economic uncertainty. 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 new full-year projection for same-store sales anticipates growth of 1% to 2%, compared with the earlier expectation of 3% to 3.5%.
Capital expenditures, including those related to investments in strategic initiatives, are projected to range from $1.6 billion to $1.7 billion, compared to the previous forecast of $1.8 billion to $1.9 billion.
