Dollar General sees sales surge in spite of challenges

The Tennessee based discount retailer has booked a 6.8 percent hike in quarterly revenue thanks to improved tobacco and candy sales.

Net sales increased 6.8 percent to $4.52 billion in the 2014 first quarter compared to $4.23 billion in the 2013 first quarter. Same-store sales increased 1.5 percent, an improvement Rick Dreiling, the company’s chairman and chief executive officer, commented as “driven by growth in consumables business whilst reflecting the challenges of unfavourable winter weather and heightened competition”. Strong sales results were led by increased sales of tobacco products, perishables and candy and snacks.

The company’s net income was $222 million, or $0,72 per diluted share, in the 2014 first quarter, compared to net income of $220 million, or $0,67 per diluted share, in the 2013 first quarter. Gross profit, as a percentage of sales, was 30.0 percent, a decrease of 57 basis points from last year’s same quarter. This decrease was largely due to increased sales of lower margin consumables, including tobacco and perishable products, which represent a significant portion of net sales.

In the 2014 first quarter, the company repurchased 14.1 million shares of its common stock under its share repurchase program at a total cost of $800 million. This affected the balance of its outstanding long-term obligations, which amounted to $3.11 billion on 2 May 2014 compared to $2.84 billion on 3 May 2013, a net increase of $271 million.

Capital expenditures on improvement of existing and opening of new stores as well as on IT, distribution and transportation projects amounted to $84 million. During the 2014 first quarter, the company opened 214 new stores.

For the 2014 fiscal year, the company expects total sales to rise 8 to 9 percent compared to the 2013 fiscal year, with same-store sales expected to increase 3 to 4 percent. Diluted earnings per share for the current fiscal year is expected to be approximately $3,45 to $3,55. Capital expenditures are expected to be between $450 million and $500 million in 2014, whilst the company plans to open about 700 new stores.