Dollar General Corp. (DG, Financial) released its third-quarter 2020 earnings results before the opening bell on Dec. 3. 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.
The company's shares surged 1.2% to $215 per share in pre-market trading following the earnings announcement.
By the numbers
The company's robust results were primarily driven by increased customer demand for lower-priced cereals, vegetables and other essentials due to low employment and falling household income amid the coronavirus pandemic.
The Goodlettsville, Tennessee-based discount store chain posted adjusted earnings per share of $2.31, which exceeded EPS of $1.42 reported in the year-ago period. Revenue of $8.2 billion surged 17.3% on a year-over-year basis. Analysts had anticipated EPS of $1.99 on $8.14 billion in revenue.
SG&A expenses fell to 21.9% 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 $773.1 million, which reflected a growth of 57.3% on a year-over-year basis.
Comparable store sales improved 12.2% in the reported quarter due to growth in the average transaction amount, which was partially offset by a decline in customer traffic. In addition, strong performance in the Consumables, Seasonal, Apparel and Home categories favorably impacted the metric.CEO Todd Vasos had the following to say:
"During the quarter, we also continued to make great progress advancing our key strategic initiatives, including the rollout of DG Pickup across nearly our entire store base, and the launch of our newest store format, pOpshelf. In total, we executed 765 real estate projects, further laying and building the foundation for future growth. Overall, our ongoing operating priorities, coupled with our key strategic initiatives, position us well to continue delivering value and convenience for our customers, along with long-term sustainable growth and value for our shareholders."
Store count
The company launched 780 new outlets, modernized 1,425 stores and repositioned 76 stores during the first three quarters of 2020. It looks forward to opening approximately 1,000 new stores, remodelling 1,670 stores and repositioning 110 stores in full fiscal 2020.
Financials and dividend payment
The discount retailer had cash and cash equivalents of $2.2 billion at the quarter's end.
The company bought back 4.4 million shares for $902 million during the third quarter of 2020. The average price spent per share was $204.58.
The Board of Directors of the company announced the next cash dividend of 36 cents per share, which will be payable to shareholders on or before Jan. 19, 2021.
Guidance
In light of the pandemic, Dollar General pulled its financial forecast for fiscal 2020. However, the company did estimate that capital spending would fall within the range of $1 billion to $1.1 billion.
Dollar General has issued store growth outlook for fiscal year 2021. The company said it plans to complete 2,900 real estate projects, which includes rolling out 1,050 new outlets, modernizing 1,750 stores and repositioning 100 stores. Chief Operating Officer Jeff Owen said:
"Our portfolio of high-return real estate projects continues to be a top priority for capital allocation as we look to continue delivering long-term shareholder value. With a robust pipeline in place and plans to execute an average of nearly eight real estate projects per day in fiscal year 2021, we are enthusiastic about the opportunity to further expand our footprint and serve even more customers across the country."
Disclosure: I do not hold any positions in the stocks mentioned.
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