Dollar General Corp. (DG, Financial) released its first-quarter 2020 earnings results before the opening bell on May 28. Both earnings and revenue surpassed Wall Street’s expectations. The company attributed its strong results to positive contributions from the new stores, coupled with robust comps growth.
By the numbers
The Goodlettsville, Tennessee-based discount store chain posted earnings per share of $2.56, which exceeded the $1.48 reported in the year-ago period. Revenue of $8.4 billion surged 27.6% on a year-over-year basis. Analysts had anticipated earnings of $1.68 per share on $7.42 billion in revenue.
SG&A expenses fell to 20.5% of sales compared to 22.5% of sales in the year-ago quarter as the coronavirus-related costs were more than offset by an increase in net sales.
Operating profit came in at $866.8 million, which reflected a growth of 69.2% on a year-over-year basis.
Strong comps
Comparable store sales improved 21.7% in the reported quarter. Growth in the average transaction amount and customer traffic drove the increase. In addition, strong performance in the Consumables, Seasonal, Apparel and Home categories favorably impacted the metric. CEO Todd Vasos had the following to say:
“We remain committed to our operating priorities and strategic initiatives to drive continued growth and meaningful long-term value for shareholders. As one of America’s essential retailers, we believe our unique brick-and-mortar footprint positions us well to continue delivering value and convenience for our customers, particularly at a time when they need us most.”
Store count
The company launched 250 new outlets, modernized 481 stores and repositioned 17 stores during the first quarter. It looks forward to opening approximately 1,000 new stores, remodelling 1,500 stores and repositioning 80 stores in full-year 2020.
Financials and liquidity
The discount retailer had cash and cash equivalents of $2.7 billion at the quarter’s end. In addition to this, the company has borrowed $1.1 billion under its revolving credit facility.
The company bought back 500,000 shares for $63 million during the first quarter of 2020. The average price per share was $139.83. The company has now temporarily halted its stock buyback program.
To strengthen its liquidity position, Dollar general issued $1.0 billion worth of 3.5% Senior Notes due in 2030 and $500 million worth of 4.125% Senior Notes due in 2050.
Guidance
Dollar General pulled its financial forecast for fiscal 2020, citing the global uncertainty caused by the coronavirus pandemic.
Disclosure: I do not hold any positions in the stocks mentioned.
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