Discount retail chain Dollar General Corp. (DG, Financial) reported its second-quarter financial results on Aug. 30, beating earnings and revenue estimates.
Key metrics
The company reported net income of $407 million, or $1.52 per share, up from $295 million, or $1.08 per share, in the year-ago quarter. Revenue grew 10.6% to $6.4 billion. Comparable sales grew 3.7%. This also beat analyst projections of a 2.7% increase.Â
The discount retailer’s margins took a hit as the company witnessed high sales of low-margin products accompanied by an increase in freight costs.
Investment in stores
As competition from Walmart (WMT, Financial) and Target (TGT, Financial), as well as new players like German discount chains Aldi and Lidl, heats up, customer traffic is declining. To combat this trend, Dollar General has been opening new stores and remodeling the existing ones; something that will continue for the remainder of the year.Â
In 2018, the company plans to open approximately 900 new stores, remodel and modernize 1,000 stores and relocate 100 stores.Â
Outlook
The company projects its sales growth for fiscal 2018 will range from 9% to 9.3%. Earnings per share are forecasted to be between $5.95 and $6.15. The discount retailer expects same-store sales growth in the mid-to-high 2% range. It hopes to repurchase roughly $850 million worth of shares in fiscal 2018. Capital expenditures are projected to be between $725 million and $800 million.
Disclosure: I do not hold any positions in the stocks mentioned in this article.
