Dollar General Reports Mixed Financial Results with 4.2% Sales Growth and Declining Profitability

Dollar General Corporation reported its financial results for the 13-week and 26-week periods ended August 2, 2024, showing a mixed performance compared to the same periods in 2023.

Net sales for the 13 weeks increased to $10,210.4 million, a 4.2% rise from $9,796.2 million in the prior year. For the 26 weeks, net sales reached $20,124.4 million, up from $19,139.0 million. The growth in sales was primarily driven by new store openings and a 1.4% increase in same-store sales, which accounted for $19.3 billion from 19,201 same-stores.

Despite the increase in sales, profitability metrics declined. Operating profit for the 13 weeks fell to $550.0 million, down 20.6% from $692.3 million in 2023. For the 26 weeks, operating profit decreased to $1,096.1 million from $1,433.2 million. Income before income taxes also saw a decline, with $481.8 million reported for the 13 weeks, down from $608.0 million, and $955.5 million for the 26 weeks, compared to $1,265.8 million in the previous year.

Net income for the 13 weeks was $374.2 million, a decrease of 20.2% from $468.8 million, while for the 26 weeks, net income dropped to $737.5 million from $983.2 million. Correspondingly, diluted earnings per share for the 13 weeks were $1.70, down from $2.13, and for the 26 weeks, they decreased to $3.35 from $4.47.

The company reported a gross profit margin of 30.0% for the 13 weeks, down from 31.1% in the prior year, attributed to increased markdowns, a higher proportion of consumables sales, and inventory shrink. Selling, General & Administrative (SG&A) expenses as a percentage of net sales rose to 24.6% from 24.0%, reflecting higher retail labor and occupancy costs.

Cash flows from operating activities significantly improved, totaling $1.653 billion for the 26 weeks, an increase of 127.4% from the previous year. The company also reported a net increase in cash and cash equivalents, reaching $1.223 billion at the end of the period, compared to $353.0 million in 2023.

Strategically, Dollar General opened 213 new stores and remodeled 478 during the second quarter of 2024, with plans to open approximately 730 new stores for the fiscal year. The company continues to focus on enhancing its distribution capabilities through the "DG Fresh" initiative, which has positively impacted sales and gross margins. However, it faces challenges from rising operating expenses and significant inventory shrink, which are expected to pressure financial results for the full fiscal year.

As of August 2, 2024, Dollar General operates 20,345 stores across the U.S. and Mexico, maintaining its position as the largest discount retailer in the U.S. by store count.