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press release

May 28, 2020, 6:55 a.m. EDT

Dollar General Corporation Reports First Quarter 2020 Results

Dollar General Corporation /zigman2/quotes/200691429/composite DG -1.40% today reported financial results for its fiscal year 2020 first quarter (13 weeks) ended May 1, 2020.

  • Net Sales Increased 27.6%; Same-Store Sales Increased 21.7%

  • Operating Profit Increased 69.2% to $866.8 million

  • Diluted Earnings Per Share (“EPS”) Increased 73.0% to $2.56

  • Cash Flows From Operations Increased 202.4% to $1.7 billion

  • Company Issued $1.5 Billion of Senior Notes

  • Board of Directors Declares Second Quarter 2020 Cash Dividend of $0.36 per share

  • Company Provides Fiscal Year 2020 Financial Update

“These are certainly unprecedented times, and our hearts go out to everyone who has been affected by the COVID-19 pandemic,” said Todd Vasos, Dollar General’s chief executive officer. “We are very grateful for those serving on the front lines, and particularly our store associates, distribution center employees and private fleet drivers for their incredible efforts. In the midst of a very challenging operating environment, our team members have been tirelessly committed to fulfilling the Company’s mission of Serving Others, and we could not be more proud of how they have responded to the needs of our communities . As a result of their efforts, we are very pleased to report strong first-quarter financial results.”

“Looking ahead, 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.”

First Quarter 2020 Highlights Net sales increased 27.6% to $8.4 billion in the first quarter of 2020 compared to $6.6 billion in the first quarter of 2019. The net sales increase included positive sales contributions from new stores and growth in same-store sales, modestly offset by the impact of store closures. Same-store sales increased 21.7% compared to the first quarter of 2019, driven by increases in both average transaction amount and customer traffic. Same-store sales increased in each of the consumables, seasonal, home products and apparel categories, with the largest percentage increase in the home products category. The Company believes consumer behavior driven by COVID-19 had a significant positive effect on net sales and same-store sales.

Gross profit as a percentage of net sales was 30.7% in the first quarter of 2020 compared to 30.2% in the first quarter of 2019, an increase of 49 basis points. This gross profit rate increase was primarily attributable to a reduction in markdowns as a percentage of net sales and higher initial markups on inventory purchases; partially offset by an increase in distribution costs, which were driven by increased volume and discretionary bonus expense. As a result of the significant increase in sales, the Company believes consumer behavior driven by COVID-19 also had a significant positive effect on gross profit dollars.

Selling, general and administrative expenses (“SG&A”) as a percentage of net sales were 20.5% in the first quarter of 2020 compared to 22.5% in the first quarter of 2019, a decrease of 204 basis points. Although the Company incurred certain incremental costs related to COVID-19, they were more than offset by the significant increase in net sales discussed above. Expenses that were lower as a percentage of net sales in the current year period include occupancy costs, retail labor, utilities, depreciation and amortization, and taxes and licenses. These items were partially offset by increased incentive compensation expenses.

Operating profit for the first quarter of 2020 increased 69.2% to $866.8 million compared to $512.2 million in the first quarter of 2019.

The effective income tax rate in the first quarter of 2020 was 22.2% compared to 20.8% in the first quarter of 2019. This higher effective income tax rate was primarily due to an increase in pre-tax earnings in the 2020 period compared to the 2019 period while items impacting the effective rate, such as the benefits from stock-based compensation and federal tax credits, remained materially the same in amount in both the 2020 and 2019 periods.

The Company reported net income of $650 million for the first quarter of 2020 compared to $385 million in the first quarter of 2019. Diluted EPS increased 73.0% to $2.56 for the first quarter of 2020 compared to diluted EPS of $1.48 in the first quarter of 2019.

COVID-19 Update To demonstrate continued appreciation for the exceptional efforts of employees, and to further safeguard the well-being of its team members and customers, Dollar General took the following actions during the quarter:

  • Awarded approximately $60 million in appreciation bonuses to front-line workers

  • Temporarily adjusted benefits and leave policies, including offering additional paid time off for those who received a COVID-19 diagnosis or who were required to care for an immediate family or household member who received a COVID-19 diagnosis, and an additional enrollment period for Telehealth services

  • Provided masks, gloves, and hand sanitizer to employees in stores and distribution centers

  • Implemented social distancing measures inside stores and distribution center common areas

  • Initiated installation of plexiglass barriers at checkout registers (now completed throughout the chain)

  • Reduced store operating hours to allow for additional time to clean and re-stock shelves

  • Dedicated a “senior” hour every day for the most vulnerable community members to shop

  • Donated $250,000 to the Dollar General Employee Assistance Foundation

  • Provided discounts for first responders, medical personnel, and National Guard members

Merchandise Inventories As of May 1, 2020, total merchandise inventories, at cost, were $4.1 billion compared to $4.1 billion as of May 3, 2019, a decrease of 5.5% on a per-store basis.

Capital Expenditures Total additions to property and equipment in the first quarter of 2020 were $195 million, including approximately: $75 million for improvements, upgrades, remodels and relocations of existing stores; $73 million for store facilities, primarily for leasehold improvements, fixtures and equipment in new stores; $32 million for distribution and transportation related projects; and $12 million for information systems upgrades and technology-related projects. During the first quarter of 2020, the Company opened 250 new stores, remodeled 481 stores and relocated 17 stores.

Share Repurchases The Company temporarily suspended repurchases of its common stock under its share repurchase program during the first quarter of 2020 to evaluate the implications of the COVID-19 pandemic. The Company repurchased $63 million of its common stock, or 0.5 million shares, under the share repurchase program at an average price of $139.83 per share in the first quarter of 2020 prior to the decision to suspend the program. The total remaining authorization for future repurchases was $1.1 billion at the end of the first quarter of 2020. Under the authorization, purchases may be made in the open market or in privately negotiated transactions from time to time subject to market and other conditions. The authorization has no expiration date.

Dividend On May 27, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.36 per share on the Company’s common stock, payable on or before July 21, 2020 to shareholders of record on July 7, 2020. 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.

Liquidity To further strengthen the Company’s liquidity position during the quarter, the Company issued $1.0 billion of 3.5% Senior Notes due in 2030 and $500.0 million of 4.125% Senior Notes due in 2050. As of May 1, 2020, the Company had $2.7 billion in cash and cash equivalents as well as $1.1 billion of availability under its revolving credit facility.

Fiscal Year 2020 Update As noted above, the Company realized a significant sales benefit in the first quarter of the fiscal year as a result of COVID-19. In addition, since the end of the first quarter, the Company has continued to experience elevated demand in its stores, albeit with slightly more variability and some moderation in recent days. As a result, through May 26, 2020, same-store sales have increased approximately 22% as compared to the comparable period in the 2019 fiscal year.

Due to the significant uncertainty that continues to exist around the severity and duration of the COVID-19 pandemic, including its impact on the U.S. economy, consumer behavior and the Company’s business, there is a lack of visibility for the remainder of 2020 with many unknowns. As a result, it is difficult to predict specific outcomes. While the Company expects it will exceed the fiscal 2020 net sales, same-store sales and diluted EPS guidance that was issued on March 12, 2020, the Company is not able to forecast the extent of such upside for the reasons mentioned above and accordingly is withdrawing the guidance issued on March 12, 2020.

However, for fiscal year 2020, the Company continues to plan for:

  • Capital expenditures in the range of $925 million to $975 million, including those related to investments in the Company’s strategic initiatives

  • Approximately 2,600 real estate projects, including 1,000 new store openings, 1,500 mature store remodels, and 80 store relocations.

In addition, the Company currently intends to resume share repurchase activity as soon as management determines it is prudent and advisable to do so, which may be as early as the 2020 second quarter.

Conference Call Information The Company will hold a conference call on May 28, 2020 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 13702341. 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 25, 2020, and will be accessible via webcast replay or by calling (877) 660-6853. The conference ID for the telephonic replay is 13702341.

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 2020 Update.” 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,” “expect,” “estimate,” “forecast,” “assume,” “opportunities,” “intend,” “continue,” ”future,” “long-term,” ”guidance,” “looking ahead,” “subject to,” “committed,” “focus on,” or “likely to,” and similar expressions that concern the Company’s strategy, plans, intentions or beliefs about future occurrences or results. These matters involve risks, uncertainties and other factors that may cause the actual performance of the Company to differ materially from that 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 the Company’s 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 to reflect events or circumstances arising after the date on which they were made, 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 16,500 stores in 46 states as of May 1, 2020. 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 .


Condensed Consolidated Balance Sheets
(In thousands)
    May 1   May 3   January 31
   2020     2019     2020 
Current assets:
Cash and cash equivalents  $          2,673,912    $             271,111    $             240,320  
Merchandise inventories               4,107,331                 4,109,759                 4,676,848  
Income taxes receivable                    17,191                      25,164                      76,537  
Prepaid expenses and other current assets                    194,049                      177,735                      184,163  
Total current assets                 6,992,483                   4,583,769                   5,177,868  
Net property and equipment                 3,320,141                   3,008,425                   3,278,359  
Operating lease assets                 8,960,805                   8,140,326                   8,796,183  
Goodwill                 4,338,589                   4,338,589                   4,338,589  
Other intangible assets, net                 1,199,961                   1,200,164                   1,200,006  
Other assets, net                      36,334                        33,011                        34,079  
Total assets    $        24,848,313      $        21,304,284      $        22,825,084  
Current liabilities:
Current portion of long-term obligations  $                    580    $                    555    $                    555  
Current portion of operating lease liabilities                  991,054                    894,469                    964,805  
Accounts payable               2,954,361                 2,452,898                 2,860,682  
Accrued expenses and other                  791,368                    560,007                    709,156  
Income taxes payable                  105,865                      48,787                        8,362  
Total current liabilities                 4,843,228                   3,956,716                   4,543,560  
Long-term obligations                 3,967,221                   2,732,105                   2,911,438  
Long-term operating lease liabilities                 7,956,759                   7,238,945                   7,819,683  
Deferred income taxes                    700,098                      629,864                      675,227  
Other liabilities                    171,553                      173,985                      172,676  
Total liabilities               17,638,859                 14,731,615                 16,122,584  
Commitments and contingencies
Shareholders' equity:
Preferred stock                              -                                -                                -  
Common stock                  220,259                    226,032                    220,444  
Additional paid-in capital               3,332,283                 3,275,917                 3,322,531  
Retained earnings               3,659,804                 3,074,584                 3,162,660  
Accumulated other comprehensive loss                     (2,892 )                       (3,864 )                       (3,135 )
Total shareholders' equity                 7,209,454                   6,572,669                   6,702,500  
Total liabilities and shareholders' equity    $        24,848,313      $        21,304,284      $        22,825,084  


Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
  For the Quarter Ended
  May 1   % of Net   May 3   % of Net
   2020    Sales    2019    Sales
Net sales  $         8,448,449   100.00 %  $              6,623,185   100.00 %
Cost of goods sold              5,852,757   69.28                         4,620,909   69.77  
Gross profit              2,595,692   30.72                       2,002,276   30.23  
Selling, general and administrative expenses              1,728,908   20.46                         1,490,039   22.50  
Operating profit                 866,784   10.26                          512,237   7.73  
Interest expense                   30,493   0.36                              25,933   0.39  
Income before income taxes                 836,291   9.90                          486,304   7.34  
Income tax expense                 185,845   2.20                            101,291   1.53  
Net income  $            650,446   7.70 %    $                   385,013   5.81 %
Earnings per share:        
Basic  $                  2.58    $                         1.49  
Diluted  $                  2.56    $                         1.48  
Weighted average shares outstanding:    
Basic                 251,780                          259,021  
Diluted                 253,627                          260,265  


Condensed Consolidated Statements of Cash Flows
(In thousands)
    For the 13 Weeks Ended
    May 1   May 3
     2020     2019 
Cash flows from operating activities:
Net income  $                650,446    $               385,013  
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization                     137,655                      122,485  
Deferred income taxes                       24,784                        10,303  
Noncash share-based compensation                       18,968                          13,631  
Other noncash (gains) and losses                         1,569                          3,527  
Change in operating assets and liabilities:
Merchandise inventories                     567,902                       (14,252 )
Prepaid expenses and other current assets                      (12,000 )                       (7,392 )
Accounts payable                     110,126                        39,707  
Accrued expenses and other liabilities                       81,113                       (47,679 )
Income taxes                     156,849                        71,394  
Other                          (1,086 )                         (2,542 )
Net cash provided by (used in) operating activities                    1,736,326                        574,195  
Cash flows from investing activities:
Purchases of property and equipment                    (195,434 )                   (144,757 )
Proceeds from sales of property and equipment                            466                             453  
Net cash provided by (used in) investing activities                      (194,968 )                     (144,304 )
Cash flows from financing activities:
Issuance of long-term obligations                  1,494,315                                  -  
Repayments of long-term obligations                           (555 )                          (525 )
Net increase (decrease) in commercial paper outstanding                    (425,200 )                   (121,300 )
Borrowings under revolving credit facilities                     300,000                                  -  
Repayments of borrowings under revolving credit facilities                    (300,000 )                                -  
Costs associated with issuance of debt                      (13,623 )                                -  
Repurchases of common stock                      (63,080 )                   (199,986 )
Payments of cash dividends                      (90,617 )                     (82,756 )
Other equity and related transactions                        (9,006 )                      10,300  
Net cash provided by (used in) financing activities                       892,234                       (394,267 )
Net increase (decrease) in cash and cash equivalents                  2,433,592                        35,624  
Cash and cash equivalents, beginning of period                     240,320                      235,487  
Cash and cash equivalents, end of period    $             2,673,912      $               271,111  
Supplemental cash flow information:
Cash paid for:
Interest  $                  48,339    $                 48,960  
Income taxes  $                    4,154    $                 19,623  
Supplemental schedule of non-cash investing and financing activities:
Right of use assets obtained in exchange for new operating lease liabilities  $                418,239    $               358,806  
Purchases of property and equipment awaiting processing for payment, included in Accounts payable $                  93,801     $                 91,384
Selected Additional Information
Sales by Category (in thousands)  
  For the Quarter Ended      
  May 1   May 3      
  2020   2019   % Change  
Consumables  $                        6,703,449  $                        5,213,155   28.6 %
Seasonal                                917,912                                736,978   24.6 %
Home products                                498,282                                375,713   32.6 %
Apparel                                328,806                                  297,339   10.6 %
Net sales  $                        8,448,449    $                        6,623,185   27.6 %
 Store Activity
      For the Quarter Ended
      May 1   May 3
      2020   2019
Beginning store count                                  16,278                     15,370  
New store openings                                       250                          240  
Store closings                                        (28 )                         (13 )
Net new stores                                       222                            227  
Ending store count                                  16,500                       15,597  
Total selling square footage (000's)                                121,930                     115,468  
Growth rate (square footage)   5.6 %   5.5 %


View source version on businesswire.com: https://www.businesswire.com/news/home/20200528005193/en/

SOURCE: Dollar General Corporation

Investor Contacts:
Donny Lau (615) 855-5591
Kevin Walker (615) 855-4954 Media Contact:
Crystal Ghassemi (615) 855-5210

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$ 214.49
-3.05 -1.40%
Volume: 3.04M
Dec. 3, 2020 7:00p
P/E Ratio
Dividend Yield
Market Cap
$54.17 billion
Rev. per Employee

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