The U.S. chain of variety stores Dollar General Corp. (DG, Financial) reported fourth-quarter earnings on March 15. The company’s revenue increased year-over-year by 2%, yet fell shy of Wall Street’s expectations. Earnings per share plunged 0.7% year-over-year to $1.48 a share.
Bird’s eye view
Dollar General’s same store sales for the quarter jumped 3.3% year over year. The rise in comps was attributable to increases in the average customer count and average transaction, as well as robust performance in the consumable and seasonal sectors. In contrast, there was a slight decline in the home products and apparel sectors as well. However, that had a negligible impact on the comps growth in the fourth quarter.
As far as consumables category is concerned, sales climbed 2.8% to $4.63 billion while the seasonal category saw 2.4% sales growth year over year to $820.2 million. Home product sales declined 2.9% to $393.5 million while the apparel category dropped 3.9% to $286.3 million in the fourth quarter.
The company’s net income for the quarter came in at $712.2 million, or $2.63 per share, up from $414.2 million, or $1.49 per share, reported a year ago. Quarterly gross profit surged 3.4% to $1.97 billion while gross margin during the same period grew 32.1%. While operating profit increased 8.4% to $623.4 million, operating margin, by contrast, declined 10.2% year over year.
At the end of the quarter, the company had cash and cash equivalents $267.4 million. The company had long-term obligations and shareholder equity of $2.61 billion and $6.13 billion, respectively. In fiscal 2017, Dollar General’s capital spending amounted to $646 million.
Guidance
Given the terrible run other discount chains are having, the company gave a strong profit outlook for the whole year. The company said that its earnings per share will range from $5.95 to $6.15 per share, which is higher than what the analysts believe. While revenue is projected to grow by 9%, comps are expected to improve roughly 2.5% this year. As a matter of fact, the company looks forward to open 900 new stores, as well. Furthermore, the company projects capital expenditure this year to range from $725 to $800 million. Strong guidance sent the company’s shares up 4.7% on March 15.
Disclosure: I do not hold any position in the stock mentioned in this article.
