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Dollar General Misses Q2 Earnings, Lowers View on Soft Sales Trends
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Shares of Dollar General Corporation (DG - Free Report) fell during the pre-market trading session after the company reported lower-than-expected second-quarter results and revised its fiscal 2024 guidance downward due to sluggish sales trends. The same-store sales growth rate also decelerated compared to the preceding quarter.
The quarterly earnings of $1.70 per share missed the Zacks Consensus Estimate of $1.79 per share and declined 20.2% from the prior-year period.
Net sales of $10,210.4 million fell short of the Zacks Consensus Estimate of $10,378 million. Despite registering an increase of 4.2% year over year, net sales came below management’s expectations as consumers became more cautious with their purchases.
DG’s Quarterly Performance: Key Metrics and Insights
For the quarter, net sales by category showed varied performance. The consumables category saw a significant increase of 6%, reaching $8,397.2 million. In contrast, the seasonal category experienced a decline of 2%, totaling $1,054.8 million. Home product sales plunged 7% to $480.2 million, while apparel saw a decrease of 1.3%, with sales dropping to $278.2 million.
Same-store sales rose 0.5% owing to a rise in customer traffic, somewhat offset by a decline in the average transaction amount. The growth rate slowed from 2.4% registered in the first quarter and also came below our projection of a 2.2% increase. Same-store sales saw growth in the consumables category, partly offset by declines in each of the home products, seasonal and apparel categories.
The gross margin shrunk 110 basis points to 30%. This contraction in the gross margin was due to higher markdowns, increased inventory damages, a greater percentage of sales from the consumables category and higher shrinkage. However, these were somewhat mitigated by a reduced LIFO provision. We had expected a gross margin contraction of 90 basis points.
Selling, general and administrative expenses, as a percentage of net sales, increased 57 basis points to 24.6% in the quarter. We had anticipated 50 basis points deleverage in SG&A expenses.
We note that the operating profit declined 20.6% year over year to $550 million, whereas the operating margin contracted 170 basis points to 5.4%. We envisioned a 140-basis point decrease in the operating margin.
Dollar General Corporation Price, Consensus and EPS Surprise
Dollar General’s Store Expansion & Remodeling Plans
During the quarter, Dollar General opened 213 new stores, remodeled 478 locations and relocated 25 stores. In fiscal 2024, the company plans to undertake 2,435 real estate projects, including 730 new store openings, 1,620 remodels and 85 store relocations.
DG’s Financial Snapshot
This Goodlettsville, TN-based company ended the quarter with cash and cash equivalents of $1,222.7 million, long-term obligations of $6,235.2 million and total shareholders’ equity of $7,260.2 million. Management incurred capital expenditures of $696 million during the 26 weeks ended Aug. 2, 2024. For fiscal 2024, the company anticipates capital expenditures in the band of $1.3-$1.4 billion.
During the quarter, Dollar General did not repurchase shares. The company had $1.4 billion remaining under its authorization at the end of the quarter. The company did not intend to repurchase shares in fiscal 2024.
What to Expect From Dollar General in Fiscal 2024?
Dollar General now envisions net sales growth between 4.7% and 5.3%, down from the prior estimate of 6% to 6.7%. It foresees same-store sales growth to fall between 1% and 1.6%, down from the earlier forecast of a 2-2.7% increase.
Management now anticipates earnings in the band of $5.50-$6.20 per share, revised down from the prior range of $6.80-$7.55. It now expects minimal impact on earnings from incentive compensation expenses, contrary to the earlier expectation of a potential negative impact of about 50 cents.
Shares of this Zacks Rank #4 (Sell) company have fallen 3.2% in the past three months against the industry’s rise of 8.2%.
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The Chefs' Warehouse (CHEF - Free Report) is a premier distributor of specialty food products in the United States, the Middle East and Canada. It currently sports a Zacks Rank #1 (Strong Buy). CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chefs' current financial-year sales and earnings suggests growth of around 9.7% and 12.6%, respectively, from the year-ago reported numbers.
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The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of around 9.6% and 18.7%, respectively, from the year-ago reported numbers.
Flowers Foods (FLO - Free Report) is one of the largest producers of packaged bakery foods in the United States. It currently carries a Zacks Rank #2 (Buy). FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings suggests growth of around 1.1% and 4.2%, respectively, from the year-ago reported numbers.
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Dollar General Misses Q2 Earnings, Lowers View on Soft Sales Trends
Shares of Dollar General Corporation (DG - Free Report) fell during the pre-market trading session after the company reported lower-than-expected second-quarter results and revised its fiscal 2024 guidance downward due to sluggish sales trends. The same-store sales growth rate also decelerated compared to the preceding quarter.
The quarterly earnings of $1.70 per share missed the Zacks Consensus Estimate of $1.79 per share and declined 20.2% from the prior-year period.
Net sales of $10,210.4 million fell short of the Zacks Consensus Estimate of $10,378 million. Despite registering an increase of 4.2% year over year, net sales came below management’s expectations as consumers became more cautious with their purchases.
DG’s Quarterly Performance: Key Metrics and Insights
For the quarter, net sales by category showed varied performance. The consumables category saw a significant increase of 6%, reaching $8,397.2 million. In contrast, the seasonal category experienced a decline of 2%, totaling $1,054.8 million. Home product sales plunged 7% to $480.2 million, while apparel saw a decrease of 1.3%, with sales dropping to $278.2 million.
Same-store sales rose 0.5% owing to a rise in customer traffic, somewhat offset by a decline in the average transaction amount. The growth rate slowed from 2.4% registered in the first quarter and also came below our projection of a 2.2% increase. Same-store sales saw growth in the consumables category, partly offset by declines in each of the home products, seasonal and apparel categories.
The gross margin shrunk 110 basis points to 30%. This contraction in the gross margin was due to higher markdowns, increased inventory damages, a greater percentage of sales from the consumables category and higher shrinkage. However, these were somewhat mitigated by a reduced LIFO provision. We had expected a gross margin contraction of 90 basis points.
Selling, general and administrative expenses, as a percentage of net sales, increased 57 basis points to 24.6% in the quarter. We had anticipated 50 basis points deleverage in SG&A expenses.
We note that the operating profit declined 20.6% year over year to $550 million, whereas the operating margin contracted 170 basis points to 5.4%. We envisioned a 140-basis point decrease in the operating margin.
Dollar General Corporation Price, Consensus and EPS Surprise
Dollar General Corporation price-consensus-eps-surprise-chart | Dollar General Corporation Quote
Dollar General’s Store Expansion & Remodeling Plans
During the quarter, Dollar General opened 213 new stores, remodeled 478 locations and relocated 25 stores. In fiscal 2024, the company plans to undertake 2,435 real estate projects, including 730 new store openings, 1,620 remodels and 85 store relocations.
DG’s Financial Snapshot
This Goodlettsville, TN-based company ended the quarter with cash and cash equivalents of $1,222.7 million, long-term obligations of $6,235.2 million and total shareholders’ equity of $7,260.2 million. Management incurred capital expenditures of $696 million during the 26 weeks ended Aug. 2, 2024. For fiscal 2024, the company anticipates capital expenditures in the band of $1.3-$1.4 billion.
During the quarter, Dollar General did not repurchase shares. The company had $1.4 billion remaining under its authorization at the end of the quarter. The company did not intend to repurchase shares in fiscal 2024.
What to Expect From Dollar General in Fiscal 2024?
Dollar General now envisions net sales growth between 4.7% and 5.3%, down from the prior estimate of 6% to 6.7%. It foresees same-store sales growth to fall between 1% and 1.6%, down from the earlier forecast of a 2-2.7% increase.
Management now anticipates earnings in the band of $5.50-$6.20 per share, revised down from the prior range of $6.80-$7.55. It now expects minimal impact on earnings from incentive compensation expenses, contrary to the earlier expectation of a potential negative impact of about 50 cents.
Shares of this Zacks Rank #4 (Sell) company have fallen 3.2% in the past three months against the industry’s rise of 8.2%.
Don’t Miss These Solid Bets
The Chefs' Warehouse (CHEF - Free Report) is a premier distributor of specialty food products in the United States, the Middle East and Canada. It currently sports a Zacks Rank #1 (Strong Buy). CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chefs' current financial-year sales and earnings suggests growth of around 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Sprouts Farmers (SFM - Free Report) , which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1. SFM has a trailing four-quarter earnings surprise of 12%, on average.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of around 9.6% and 18.7%, respectively, from the year-ago reported numbers.
Flowers Foods (FLO - Free Report) is one of the largest producers of packaged bakery foods in the United States. It currently carries a Zacks Rank #2 (Buy). FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings suggests growth of around 1.1% and 4.2%, respectively, from the year-ago reported numbers.