Dollar General Gaps Ahead on Q4 Earnings Beat

Andrew Klips |

Dollar General Corp. (DG) on Monday reported record fourth-quarter earnings that topped analyst predictions despite less-than-expected sales, while also delivering guidance in line with expectations and announcing the retirement of its long-time General Counsel and Executive Vice President.

The Goodlettsville, Tennessee-based discount retailer said that revenue during the fourth quarter ended February 1, 2013 increased to $4.21 billion, up 0.5 percent from $4.19 billion in the same period the year earlier. 2011 also benefited from an extra week of sales. Excluding that week, Q4 2012 sales were 8.0 percent ahead. Profits for the latest quarter were $317.42 million, or 97 cents per share, up from $292.51 million, or 85 cents per share, in the year prior quarter.

Analysts were expecting EPS of 90 cents on revenue of $4.26 billion.

Same-store-sales, a measure of performance of stores open more than one year, increased 3 percent from the year earlier, as traffic increased and more consumables were purchased, helping drive up average transaction amounts. By comparison, rival Wal-Mart reported Q4 same-store-sales growth of only 1 percent.

“Dollar General had yet another outstanding year in 2012 including exceptionally strong fourth quarter results. We grew our market share and invested strategically to continue to win with our customers,” said Rick Dreiling, chairman and chief executive officer at Dollar General in a prepared statement today.

For the full-year 2012, net sales grew 8.2 percent to $16.02 billion, versus $14.81 billion in 2011, which included a 53rd week. Excluding the extra week 2012 sales beat 2011 sales by 10.4 percent. Dollar General reported net income of $953 million, or diluted EPS of $2.85 for fiscal year 2012 compared to net income of $767 million, or diluted EPS of $2.22 for fiscal year 2011. Adjusted net income, which excludes one-time charges, increased 19 percent to $973 million, or $2.91 per diluted share, in fiscal 2012, compared to adjusted net income of $819 million, or $2.37 per diluted share, in fiscal 2011.

Looking forward, Dollar General sees fiscal 2013 sales increasing between 10 percent and 12 percent over fiscal 2012. Same-store-sales are seen as growing 4 percent to 6 percent. Operating profit is expected in the range of $1.78 billion to $1.845 billion. The company said that it will face challenges in the first half of the year, such as rollout of tobacco products to nearly all its stores and comparison to a stellar Q1 in 2012, but profits will be strong in the second half of the year to make-up for it. DG expects 2013 adjusted earnings in the range of $3.15 to $3.30 per share.

Wall Street was expecting EPS of $3.27 per share for fiscal 2013.

Separately, Dollar General also reported that EVP and General Counsel Susan Lanigan, an 11-year Dollar General veteran, has decided to retire. The company said it has begun to look, internally and externally, for a replacement.

Shares of DG gapped up at the opening bell with the earnings beat and are trading ahead by about 4 percent at $52.10 early in Monday’s action. Shares are up about 12 percent in the past year.

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