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Dollar General 3rd-Quarter Profit Rose 21% as Consumables Lead Sales Growth

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12/11/2012 | 01:45pm CET
   By Tess Stynes 

Dollar General Corp.'s (>> Dollar General Corp.) fiscal third-quarter earnings rose 21% as the discount retailer reported that increased sales of consumable items outpaced sales growth in other categories.

For the year, the company raised the lower end of its per-share earnings estimate by a nickel and now expects $2.82 to $2.85 and affirmed its projection for same-store-sales growth.

Dollar General has posted higher profits recently as it continues to add new stores and has been stocking better-known brands on it shelves. The company has also been experimenting with bigger stores and refurbishing old ones.

Ahead of the holiday selling season, the discount chain has been offering 10% discounts on toy purchases totaling $75 or more. Dollar General also had added more licensed and name-brand items to its toy line-up, from companies such as Mattel Inc. (>> Mattel, Inc.), Walt Disney Co. (>> The Walt Disney Company) and Hasbro Inc. (>> Hasbro, Inc.). Many toys offered by Dollar General are priced between $3 and $20.

"Although our performance over the Thanksgiving weekend and start of the holiday season has been encouraging, we continue to be cautious for the remainder of the year," Chairman and Chief Executive Rick Dreiling said. "We are facing a significant same-store sales comparison from our 2011 fourth quarter, which included very strong January sales, growing near-term pressures that are impacting our customers' confidence and spending, and a challenging competitive environment."

For the quarter ended Nov. 2, Dollar General reported a profit of $208 million, or 62 cents a share, up from $171 million, or 50 cents a share, a year earlier. Excluding stock-based compensation impacts and other items, adjusted earnings were 63 cents.

Revenue increased 10% to $3.96 billion amid increases in customer traffic and average transaction amount. Same-store sales were up 4%.

Analysts polled by Thomson Reuters most recently projected earnings of 60 cents on revenue of $3.96 billion.

Gross margin fell to 30.9% from 31% amid higher markdowns, an increased portion of consumable items in the sales mix an increased rate of shoplifting .

Sales of consumable items--which account for the bulk of Dollar General's top line--rose 11% to $3 billion, led by strong growth in sales of candy and snacks and perishables offerings.

Shares of Dollar General, which recently replaced Cooper Industries PLC in the Standard & Poor's 500-stock index after the electrical-products maker was acquired by Eaton Corp. (>> Eaton Corporation), closed Monday at $46.57 and were inactive premarket.

Write to Tess Stynes at tess.stynes@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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Financials ($)
Sales 2017 21 972 M
EBIT 2017 2 047 M
Net income 2017 1 239 M
Debt 2017 2 727 M
Yield 2017 1,29%
P/E ratio 2017 17,73
P/E ratio 2018 16,33
EV / Sales 2017 1,09x
EV / Sales 2018 1,05x
Capitalization 21 328 M
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Dollar General Corp. Technical Analysis Chart | DG | US2566771059 | 4-Traders
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Technical analysis trends DOLLAR GENERAL CORP.
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Mean consensus OUTPERFORM
Number of Analysts 30
Average target price 80,1 $
Spread / Average Target 3,8%
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Todd J. Vasos Chief Executive Officer & Director
Mike M. Calbert Chairman
John W. Garratt Chief Financial Officer & Executive Vice President
Warren F. Bryant Independent Director
William C. Rhodes Independent Director
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