Dollar General (DG) Q4 Earnings Beat, Sales Increase Y/Y
Dollar General Corporation DG came up with fourth-quarter fiscal 2021 results. While the top line marginally fell short of the Zacks Consensus Estimate, the bottom line beat the same. Net sales increased year over year but earnings per share continued to decline. The discount retailer witnessed soft same-store sales performance. Nonetheless, this Goodlettsville, TN-based company issued an upbeat outlook for fiscal 2022 that sent shares up in the pre-market trading hours. The company also hiked its quarterly dividend by roughly 31% to 55 cents per share.
Let’s Delve Deeper
Quarterly earnings came in at $2.57 per share that beat the Zacks Consensus Estimate by a penny but declined 1.9% from the prior-year period.
Net sales of $8,651.4 million rose 2.8% from the prior-year period on sales contributions from new stores, partly offset by the impact of store closures and a decline in same-store sales. The top line marginally missed the Zacks Consensus Estimate of $8,694 million.
Dollar General’s same-store sales fell 1.4% year over year, owing to lower customer traffic, partly offset by a rise in the average transaction amount. Same-store sales also reflected a decline in each of the Apparel, Consumables, Seasonal, and Home Products categories.
Based on categories, sales increased 3.8% year over year to $6,562.8 million for Consumables, 2.7% to $1,127.6 million for Seasonal, and 5% to $638.8 million for Home Products. However, sales declined 16.7% to $322.3 million for the Apparel category.
Gross profit declined 1.3% to $2,700.2 million in the reported quarter, while gross margin contracted 131 basis points to 31.2%. The decline was due to higher transportation and distribution expenses, an increased LIFO provision, and a significant proportion of sales from the low-margin consumables category. These were partly offset by a reduction in markdowns as a percentage of net sales and higher inventory markups.
SG&A expenses, as a percentage of net sales, decreased 16 basis points to 22% in the quarter. Operating profit dipped 8.7% to $796.7 million, whereas operating margin shriveled 116 bps to 9.2% from the year-ago period.
Dollar General Corporation Price, Consensus and EPS Surprise
Dollar General Corporation price-consensus-eps-surprise-chart | Dollar General Corporation Quote
Store Update
During fiscal 2021, Dollar General opened 1,050 new stores, remodeled 1,752 stores, and relocated 100 stores. The company anticipates carrying out 2,980 real estate projects, including 1,110 store openings, 1,750 remodels and 120 store relocations in fiscal 2022.
Other Financial Details
Dollar General ended the quarter with cash and cash equivalents of $344.8 million, long-term obligations of $4,172.1 million, and shareholders’ equity of $6,262 million.
Management incurred capital expenditures of $1.1 billion in fiscal 2021. For fiscal 2022, the company anticipates capital expenditure in the band of $1.4-$1.5 billion.
In fiscal 2021, Dollar General repurchased 12.1 million shares for $2.5 billion. The company had $2.1 billion remaining under the authorization at the end of fiscal 2021. It expects to make share repurchases of $2.75 billion in fiscal 2022.
Outlook
Dollar General cautioned about the current geopolitical tension and uncertainty related to the recovery from the impact of the COVID-19 pandemic, including its impact on the U.S. economy, consumer behavior and the business.
Despite this uncertainty, management anticipates net sales growth of about 10%, including an estimated benefit of approximately two percentage points from the 53rd week. It guided same-store sales growth of roughly 2.5%. Dollar General projected earnings per share growth in the range of 12-14%, including an estimated benefit of approximately four percentage points from the 53rd week.
Management foresees a tough first-quarter fiscal 2022 owing to increased cost pressures, ongoing supply chain bottlenecks, and the prior year sales and gross margin comparison, both of which were favorably impacted by stimulus payments.
For 13-week quarter ending Apr 29, 2022, Dollar General expects same-store sales to decline in the band of 1-2% and forecast earnings between $2.25 and $2.35 per share, down from $2.82 reported in the year-ago period.
Shares of this Zacks Rank #4 (Sell) company have fallen 3.5% in the past three months compared with the industry’s decline of 4.1%.
3 Stocks Looking Red Hot
Here we highlight three better-ranked stocks, namely, Tapestry TPR, Tractor Supply Company TSCO and Sprouts Farmers SFM.
Tapestry, which provides luxury accessories and branded lifestyle products, carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 28.2%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Tapestry’s current financial year sales and EPS suggests growth of 17.5% and 22.9%, respectively, from the year-ago period. TPR has an expected EPS growth rate of 12.5% for three-five years.
Tractor Supply Company, a rural lifestyle retailer in the United States, carries a Zacks Rank #2 at present. TSCO has an expected EPS growth rate of 9.8% for three-five years.
The Zacks Consensus Estimate for Tractor Supply Company’s current financial-year sales and EPS suggests growth of 8.2% and 9.2%, respectively, from the corresponding year-ago period’s actuals. TSCO has a trailing four-quarter earnings surprise of 22%, on average.
Sprouts Farmers offering fresh, natural and organic food products currently carries a Zacks Rank of 2. SFM has an expected EPS growth rate of 7.3% for three-five years.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and EPS suggests growth of 4.7% and 4.8%, respectively, from the corresponding year-ago period’s readings. SFM has a trailing four-quarter earnings surprise of 17.9%, on average.
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