Dollar General Corporation (NYSE: DG) today reported financial results for its fiscal year 2022 first quarter (13 weeks) ended April 29, 2022.
"We are pleased with our start to 2022, and I want to thank each of our team members for their ongoing commitment and dedication to serving our customers every day," said Todd Vasos, Dollar General's chief executive officer. "Despite ongoing headwinds due to supply chain pressures and heightened inflation, we remained focused on controlling what we can control and delivered solid financial results, which exceeded our expectations for sales and EPS for the quarter."
"During the first quarter, we executed more than 800 real estate projects, and made significant progress advancing our key strategic initiatives to enhance the value and convenience proposition for our customers. We continue to drive strategic innovation as we further differentiate Dollar General in the discount retail channel, while delivering long-term sustainable growth and value for our shareholders."
First Quarter 2022 Highlights
Net sales increased 4.2% to $8.8 billion in the first quarter of 2022 compared to $8.4 billion in the first quarter of 2021. The net sales increase was primarily driven by positive sales contributions from new stores, partially offset by the slight decline in same-store sales and the impact of store closures. Same-store sales decreased 0.1% compared to the first quarter of 2021, driven by a decline in customer traffic, partially offset by an increase in average transaction amount. Same-store sales in the first quarter of 2022 declined in each of the seasonal, apparel, and home products categories, offset by an increase in the consumables category.
Gross profit as a percentage of net sales was 31.3% in the first quarter of 2022 compared to 32.8% in the first quarter of 2021, a decrease of 151 basis points. This gross profit rate decrease was primarily attributable to a greater proportion of sales coming from the consumables category, which generally has a lower gross profit rate than other product categories; an increased LIFO provision, which was driven by higher product costs; increased transportation costs; an increase in markdowns as a percentage of sales; increased distribution costs; and an increase in inventory damages. These factors were partially offset by higher inventory markups.
Selling, general and administrative expenses ("SG&A") as a percentage of net sales were 22.8% in the first quarter of 2022 compared to 22.0% in the first quarter of 2021, an increase of 78 basis points. The primary expenses that were a greater percentage of net sales in the current year period were retail labor, store occupancy costs, depreciation and amortization and utilities; partially offset by reductions in incentive compensation and winter storm related disaster expenses.
Operating profit for the first quarter of 2022 decreased 17.9% to $746.2 million compared to $908.9 million in the first quarter of 2021.
The effective income tax rate in the first quarter of 2022 was 21.8% compared to 22.0% in the first quarter of 2021. This lower effective income tax rate was primarily due to a decrease in pre-tax earnings in the 2022 period compared to the 2021 period while rate impacting items, such as the benefits from stock-based compensation and federal tax credits, remained materially the same in amount in both the 2022 and 2021 periods.
The Company reported net income of $552.7 million for the first quarter of 2022, a decrease of 18.5% compared to $677.7 million in the first quarter of 2021. Diluted EPS decreased 14.5% to $2.41 for the first quarter of 2022 compared to diluted EPS of $2.82 in the first quarter of 2021.
Merchandise Inventories
As of April 29, 2022, total merchandise inventories, at cost, were $6.1 billion compared to $5.1 billion as of April 30, 2021, an increase of 13.3% on a per-store basis. This increase primarily reflects the impact of product cost inflation and a greater mix of higher-value products.
Capital Expenditures
Total additions to property and equipment in first quarter of 2022 were $282 million, including approximately: $112 million for improvements, upgrades, remodels and relocations of existing stores; $107 million related to store facilities, primarily for leasehold improvements, fixtures and equipment in new stores; $47 million for distribution and transportation-related projects; and $9 million for information systems upgrades and technology-related projects. During first quarter of 2022, the Company opened 239 new stores, remodeled 532 stores, and relocated 32 stores.
Share Repurchases
In the first quarter of 2022, the Company repurchased $747 million of its common stock, or 3.4 million shares, at an average price of $220.13 per share, under its share repurchase program. The total remaining authorization for future repurchases was $1.4 billion at the end of the first quarter of 2022. Under the authorization, repurchases may be made from time to time in open market transactions, including pursuant to trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions. The timing, manner and number of shares repurchased will depend on a variety of factors, including price, market conditions, compliance with the covenants and restrictions under the Company's debt agreements and other factors. The authorization has no expiration date.
Dividend
On May 25, 2022, the Company's Board of Directors declared a quarterly cash dividend of $0.55 per share on the Company's common stock, payable on or before July 19, 2022 to shareholders of record on July 5, 2022. While the Board of Directors intends to continue regular cash dividends, the declaration and amount of future dividends are subject to the sole discretion of the Board and will depend upon, among other things, the Company's results of operations, cash requirements, financial condition, contractual restrictions, and other factors the Board may deem relevant in its sole discretion.
Fiscal Year 2022 Financial Guidance and Store Growth Outlook
Despite the ongoing uncertainties arising from product cost inflation and continued pressure in the supply chain, the Company is updating its sales guidance, and reiterating the remainder of its financial guidance, for the 53-week fiscal year ending February 3, 2023 ("fiscal year 2022") issued on March 17, 2022. The Company now expects the following:
The Company continues to expect the following:
The Company is also reiterating its plans to execute 2,980 real estate projects in fiscal year 2022, including 1,110 new store openings, 1,750 remodels, and 120 store relocations.
"We are pleased with our strong start to the year," said John Garratt, Dollar General's chief financial officer. "As a result of our strong topline performance and current expectations for the remainder of the year, we are raising our net sales and same-store sales guidance for fiscal 2022. Looking ahead, our plans include targeted investments to further enhance the in-store experience, while driving an even greater improvement in in-stock levels and customer service. We believe these investments will position us well to build on our sales momentum as we move ahead."
Conference Call Information
The Company will hold a conference call on May 26, 2022 at 9:00 a.m. CT/10:00 a.m. ET, hosted by Todd Vasos, chief executive officer, Jeff Owen, chief operating officer, and John Garratt, chief financial officer. To participate via telephone, please call (877) 407-0890 at least 10 minutes before the conference call is scheduled to begin. The conference ID is 13729427. There will also be a live webcast of the call available at https://investor.dollargeneral.com under "News & Events, Events & Presentations." A replay of the conference call will be available through June 23, 2022, and will be accessible via webcast replay or by calling (877) 660-6853. The conference ID for the telephonic replay is 13729427.
Forward-Looking Statements
This press release contains forward-looking information within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act. Forward-looking statements include those regarding the Company's outlook, strategy, initiatives, plans and intentions including, but not limited to, statements made within the quotation of Mr. Vasos, and in the sections entitled "Share Repurchases," "Dividend," and "Fiscal Year 2022 Financial Guidance and Store Growth Outlook." A reader can identify forward-looking statements because they are not limited to historical fact or they use words such as "outlook," "may," "will," "should," "could," "would," "can," "believe," "anticipate," "plan," "project," "expect," "estimate," "target," "forecast," "predict," "position," "assume," "opportunities," "intend," "continue," "future," "beyond," "ongoing," "potential," "long-term," "guidance," "goal," "outcome," "uncertainty," "look to," "move ahead," "looking ahead," "subject to," "committed," "confident," "focus on," or "likely to," and similar expressions that concern the Company's strategies, plans, initiatives, intentions or beliefs about future occurrences or results. These matters involve risks, uncertainties and other factors that may change at any time and may cause actual results to differ materially from those which the Company expected. Many of these statements are derived from the Company's operating budgets and forecasts as of the date of this release, which are based on many detailed assumptions that the Company believes are reasonable. However, it is very difficult to predict the effect of known factors on future results, and the Company cannot anticipate all factors that could affect future results that may be important to an investor. All forward-looking information should be evaluated in the context of these risks, uncertainties and other factors. Important factors that could cause actual results to differ materially from the expectations expressed in or implied by such forward-looking statements include, but are not limited to:
All forward-looking statements are qualified in their entirety by these and other cautionary statements that the Company makes from time to time in its SEC filings and public communications. The Company cannot assure the reader that it will realize the results or developments the Company anticipates or, even if substantially realized, that they will result in the consequences or affect the Company or its operations in the way the Company expects. Forward-looking statements speak only as of the date made. The Company undertakes no obligation, and specifically disclaims any duty, to update or revise any forward-looking statements as a result of new information, future events or circumstances, or otherwise, except as otherwise required by law. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, the Company.
Investors should also be aware that while the Company does, from time to time, communicate with securities analysts and others, it is against the Company's policy to disclose to them any material, nonpublic information or other confidential commercial information. Accordingly, shareholders should not assume that the Company agrees with any statement or report issued by any securities analyst regardless of the content of the statement or report. Furthermore, the Company has a policy against confirming projections, forecasts or opinions issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the Company's responsibility.
About Dollar General Corporation
Dollar General Corporation has been delivering value to shoppers for more than 80 years. Dollar General helps shoppers Save time. Save money. Every day.® by offering products that are frequently used and replenished, such as food, snacks, health and beauty aids, cleaning supplies, basic apparel, housewares and seasonal items at everyday low prices in convenient neighborhood locations. Dollar General operated 18,356 stores in 47 states as of April 29, 2022. In addition to high-quality private brands, Dollar General sells products from America's most-trusted manufacturers such as Clorox, Energizer, Procter & Gamble, Hanes, Coca-Cola, Mars, Unilever, Nestle, Kimberly-Clark, Kellogg's, General Mills, and PepsiCo. Learn more about Dollar General at www.dollargeneral.com.
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||||||
Condensed Consolidated Balance Sheets | ||||||||||||
(In thousands) | ||||||||||||
(Unaudited) |
|
|
||||||||||
April 29 |
|
April 30 |
|
January 28 |
||||||||
2022 |
|
2021 |
|
2022 |
||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ |
335,613 |
|
$ |
688,055 |
|
$ |
344,829 |
|
|||
Merchandise inventories |
|
6,087,399 |
|
|
5,099,465 |
|
|
5,614,325 |
|
|||
Income taxes receivable |
|
33,576 |
|
|
16,637 |
|
|
97,394 |
|
|||
Prepaid expenses and other current assets |
|
280,282 |
|
|
237,588 |
|
|
247,295 |
|
|||
Total current assets |
|
6,736,870 |
|
|
6,041,745 |
|
|
6,303,843 |
|
|||
Net property and equipment |
|
4,451,028 |
|
|
3,999,170 |
|
|
4,346,127 |
|
|||
Operating lease assets |
|
10,183,152 |
|
|
9,614,974 |
|
|
10,092,930 |
|
|||
Goodwill |
|
4,338,589 |
|
|
4,338,589 |
|
|
4,338,589 |
|
|||
Other intangible assets, net |
|
1,199,720 |
|
|
1,199,840 |
|
|
1,199,750 |
|
|||
Other assets, net |
|
46,949 |
|
|
42,380 |
|
|
46,132 |
|
|||
Total assets | $ |
26,956,308 |
|
$ |
25,236,698 |
|
$ |
26,327,371 |
|
|||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Current portion of long-term obligations | $ |
900,635 |
|
$ |
- |
|
$ |
- |
|
|||
Current portion of operating lease liabilities | $ |
1,205,043 |
|
$ |
1,101,369 |
|
$ |
1,183,559 |
|
|||
Accounts payable |
|
3,906,852 |
|
|
3,294,423 |
|
|
3,738,604 |
|
|||
Accrued expenses and other |
|
930,260 |
|
|
861,653 |
|
|
1,049,139 |
|
|||
Income taxes payable |
|
9,051 |
|
|
57,953 |
|
|
8,055 |
|
|||
Total current liabilities |
|
6,951,841 |
|
|
5,315,398 |
|
|
5,979,357 |
|
|||
Long-term obligations |
|
3,947,462 |
|
|
4,130,710 |
|
|
4,172,068 |
|
|||
Long-term operating lease liabilities |
|
8,959,174 |
|
|
8,499,442 |
|
|
8,890,709 |
|
|||
Deferred income taxes |
|
907,020 |
|
|
769,430 |
|
|
825,254 |
|
|||
Other liabilities |
|
229,187 |
|
|
271,793 |
|
|
197,997 |
|
|||
Total liabilities |
|
20,994,684 |
|
|
18,986,773 |
|
|
20,065,385 |
|
|||
Commitments and contingencies | ||||||||||||
Shareholders' equity: | ||||||||||||
Preferred stock |
|
- |
|
|
- |
|
|
- |
|
|||
Common stock |
|
198,623 |
|
|
206,680 |
|
|
201,265 |
|
|||
Additional paid-in capital |
|
3,606,414 |
|
|
3,457,160 |
|
|
3,587,914 |
|
|||
Retained earnings |
|
2,157,589 |
|
|
2,588,006 |
|
|
2,473,999 |
|
|||
Accumulated other comprehensive loss |
|
(1,002 |
) |
|
(1,921 |
) |
|
(1,192 |
) |
|||
Total shareholders' equity |
|
5,961,624 |
|
|
6,249,925 |
|
|
6,261,986 |
|
|||
Total liabilities and shareholders' equity | $ |
26,956,308 |
|
$ |
25,236,698 |
|
$ |
26,327,371 |
|
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | |||||||||||
Condensed Consolidated Statements of Income | |||||||||||
(In thousands, except per share amounts) | |||||||||||
(Unaudited) | |||||||||||
For the Quarter Ended |
|||||||||||
April 29 |
% of Net |
|
April 30 |
% of Net |
|||||||
2022 |
Sales |
|
2021 |
Sales |
|||||||
Net sales | $ |
8,751,352 |
100.00 |
% |
$ |
8,400,964 |
100.00 |
% |
|||
Cost of goods sold |
|
6,012,989 |
68.71 |
|
5,645,296 |
67.20 |
|||||
Gross profit |
|
2,738,363 |
31.29 |
|
2,755,668 |
32.80 |
|||||
Selling, general and administrative expenses |
|
1,992,206 |
22.76 |
|
1,846,818 |
21.98 |
|||||
Operating profit |
|
746,157 |
8.53 |
|
908,850 |
10.82 |
|||||
Interest expense |
|
39,676 |
0.45 |
|
40,392 |
0.48 |
|||||
Income before income taxes |
|
706,481 |
8.07 |
|
868,458 |
10.34 |
|||||
Income tax expense |
|
153,824 |
1.76 |
|
190,709 |
2.27 |
|||||
Net income | $ |
552,657 |
6.32 |
% |
$ |
677,749 |
8.07 |
% |
|||
Earnings per share: | |||||||||||
Basic | $ |
2.42 |
$ |
2.84 |
|||||||
Diluted | $ |
2.41 |
$ |
2.82 |
|||||||
Weighted average shares outstanding: | |||||||||||
Basic |
|
228,477 |
|
238,548 |
|||||||
Diluted |
|
229,609 |
|
240,301 |
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
(In thousands) | ||||||||
(Unaudited) | ||||||||
For the 13 Weeks Ended | ||||||||
April 29 |
|
April 30 |
||||||
2022 |
|
2021 |
||||||
Cash flows from operating activities: | ||||||||
Net income | $ |
552,657 |
|
$ |
677,749 |
|
||
Adjustments to reconcile net income to net cash | ||||||||
from operating activities: | ||||||||
Depreciation and amortization |
|
172,563 |
|
|
154,146 |
|
||
Deferred income taxes |
|
81,679 |
|
|
58,794 |
|
||
Noncash share-based compensation |
|
26,945 |
|
|
23,533 |
|
||
Other noncash (gains) and losses |
|
68,585 |
|
|
13,040 |
|
||
Change in operating assets and liabilities: | ||||||||
Merchandise inventories |
|
(538,921 |
) |
|
135,732 |
|
||
Prepaid expenses and other current assets |
|
(34,482 |
) |
|
(41,831 |
) |
||
Accounts payable |
|
172,110 |
|
|
(295,206 |
) |
||
Accrued expenses and other liabilities |
|
(116,384 |
) |
|
(136,743 |
) |
||
Income taxes |
|
64,814 |
|
|
116,013 |
|
||
Other |
|
(50 |
) |
|
(2,236 |
) |
||
Net cash provided by (used in) operating activities |
|
449,516 |
|
|
702,991 |
|
||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment |
|
(281,580 |
) |
|
(277,730 |
) |
||
Proceeds from sales of property and equipment |
|
736 |
|
|
807 |
|
||
Net cash provided by (used in) investing activities |
|
(280,844 |
) |
|
(276,923 |
) |
||
Cash flows from financing activities: | ||||||||
Issuance of long-term obligations |
|
- |
|
|
- |
|
||
Repayments of long-term obligations |
|
(3,034 |
) |
|
(1,753 |
) |
||
Net increase (decrease) in commercial paper outstanding |
|
705,300 |
|
|
- |
|
||
Borrowings under revolving credit facilities |
|
- |
|
|
- |
|
||
Repayments of borrowings under revolving credit facilities |
|
- |
|
|
- |
|
||
Costs associated with issuance of debt |
|
- |
|
|
- |
|
||
Repurchases of common stock |
|
(746,773 |
) |
|
(1,000,352 |
) |
||
Payments of cash dividends |
|
(125,262 |
) |
|
(99,832 |
) |
||
Other equity and related transactions |
|
(8,119 |
) |
|
(12,653 |
) |
||
Net cash provided by (used in) financing activities |
|
(177,888 |
) |
|
(1,114,590 |
) |
||
Net increase (decrease) in cash and cash equivalents |
|
(9,216 |
) |
|
(688,522 |
) |
||
Cash and cash equivalents, beginning of period |
|
344,829 |
|
|
1,376,577 |
|
||
Cash and cash equivalents, end of period | $ |
335,613 |
|
$ |
688,055 |
|
||
Supplemental cash flow information: | ||||||||
Cash paid for: | ||||||||
Interest | $ |
52,349 |
|
$ |
55,858 |
|
||
Income taxes | $ |
7,226 |
|
$ |
15,801 |
|
||
Supplemental schedule of non-cash investing and financing activities: | ||||||||
Right of use assets obtained in exchange for new operating lease liabilities | $ |
396,628 |
|
$ |
417,749 |
|
||
Purchases of property and equipment awaiting processing for payment, | ||||||||
included in Accounts payable | $ |
141,202 |
|
$ |
93,599 |
|
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES | |||||||||
Selected Additional Information | |||||||||
(Unaudited) | |||||||||
Sales by Category (in thousands) | |||||||||
For the Quarter Ended | |||||||||
April 29 |
|
April 30 |
|
|
|||||
2022 |
|
2021 |
|
% Change |
|||||
Consumables | $ |
6,960,501 |
$ |
6,378,135 |
|
9.1 |
% |
||
Seasonal |
|
961,378 |
|
1,050,382 |
|
-8.5 |
% |
||
Home products |
|
539,822 |
|
571,315 |
|
-5.5 |
% |
||
Apparel |
|
289,651 |
|
401,132 |
|
-27.8 |
% |
||
Net sales | $ |
8,751,352 |
$ |
8,400,964 |
|
4.2 |
% |
||
Store Activity | |||||||||
For the Quarter Ended |
|||||||||
April 29 |
|
April 30 |
|||||||
2022 |
|
2021 |
|||||||
Beginning store count |
|
18,130 |
|
17,177 |
|
||||
New store openings |
|
239 |
|
260 |
|
||||
Store closings |
|
(13 |
) |
(11 |
) |
||||
Net new stores |
|
226 |
|
249 |
|
||||
Ending store count |
|
18,356 |
|
17,426 |
|
||||
Total selling square footage (000's) |
|
136,466 |
|
128,953 |
|
||||
Growth rate (square footage) |
|
5.8 |
% |
5.8 |
% |
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