Dollar General Corp (DG) Reports Mixed Fiscal 2023 Results Amid Operational Challenges
Net Sales: Fourth quarter net sales decreased by 3.4% to $9.9 billion, while fiscal year net sales increased by 2.2% to $38.7 billion.
Same-Store Sales: Fourth quarter same-store sales rose by 0.7%, with a fiscal year increase of 0.2%.
Operating Profit: Operating profit declined by 37.9% to $579.7 million in the fourth quarter and by 26.5% to $2.4 billion for the fiscal year.
Diluted EPS: Fourth quarter diluted EPS decreased by 38.2% to $1.83, with a fiscal year decrease of 29.3% to $7.55.
Cash Flows: Annual cash flows from operations increased by 20.5% to $2.4 billion.
Dividend: Board of Directors declared a quarterly cash dividend of $0.59 per share.
Store Growth: The company opened 987 new stores, remodeled 2,007 stores, and relocated 129 stores during the fiscal year.
On March 14, 2024, Dollar General Corp (NYSE:DG) released its 8-K filing, disclosing the financial results for its fiscal year 2023 fourth quarter and full year ended February 2, 2024. The company, known for its expansive presence across rural America with over 19,000 locations, serves as a convenient shopping destination offering a range of consumable items, seasonal merchandise, home products, and apparel, primarily at a price point of $10 or lower.
Financial Performance and Challenges
Dollar General's fourth quarter saw a decrease in net sales by 3.4% to $9.9 billion, attributed mainly to the period containing one less week of sales compared to the prior year, as well as the impact of store closures. Despite this, same-store sales experienced a slight increase of 0.7%, driven by an uptick in customer traffic. For the fiscal year, net sales rose by 2.2% to $38.7 billion, with same-store sales inching up by 0.2%. The company's operating profit took a hit, decreasing by 37.9% to $579.7 million in the fourth quarter and by 26.5% to $2.4 billion for the fiscal year. Diluted EPS also saw a significant drop of 38.2% to $1.83 for the fourth quarter and a 29.3% decrease to $7.55 for the fiscal year.
The company's gross profit rate decreased, primarily due to increased shrink and inventory markdowns, lower inventory markups, and a greater proportion of sales from the consumables category, which generally has a lower gross profit rate. SG&A expenses as a percentage of net sales also increased, with the primary expenses being retail labor, store occupancy costs, depreciation and amortization, repairs and maintenance, and other services purchased.
Financial Achievements and Importance
Despite the challenges, Dollar General reported a 20.5% increase in annual cash flows from operations to $2.4 billion. This is a significant achievement for the company, as it indicates a strong operational cash generation capability, which is crucial for its expansion and remodeling plans. Additionally, the Board of Directors declared a quarterly cash dividend of $0.59 per share, reflecting the company's commitment to returning value to shareholders.
Operational Highlights and Future Outlook
During fiscal year 2023, Dollar General opened 987 new stores, remodeled 2,007 stores, and relocated 129 stores. The company did not repurchase any shares under its share repurchase program, with a remaining authorization for future repurchases of $1.4 billion. For the fiscal year 2024, Dollar General expects net sales growth in the range of approximately 6.0% to 6.7%, same-store sales growth of 2.0% to 2.7%, and diluted EPS in the range of approximately $6.80 to $7.55. The company also plans to execute approximately 2,385 real estate projects, including 800 new store openings, 1,500 remodels, and 85 store relocations.
"We were pleased to deliver fourth quarter top and bottom-line results at the upper end of our internal expectations," said Todd Vasos, Dollar Generals chief executive officer. "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."
"We are encouraged by the progress we are making with our efforts in getting Back to the Basics, and we anticipate the benefit of these actions will continue to grow as we move throughout fiscal year 2024," said Kelly Dilts, Dollar Generals chief financial officer.
As Dollar General continues to navigate a challenging retail environment, the company's focus on its "Back to Basics" strategy and operational improvements positions it to potentially strengthen its foundation for future growth and create sustainable long-term value for shareholders.
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Explore the complete 8-K earnings release (here) from Dollar General Corp for further details.
This article first appeared on GuruFocus.
