Dollar General reports hike in Q4, fiscal year 2022 sales

In reporting Q4 and fiscal year 2022 results, Dollar General shared that its Q4 sales, although below its expectations, were strong due to continued market share gains in consumables and non-consumables and continued growth with new and existing customers.   

Dollar General’s net sales increased 17.9% to $10.2 billion in the quarter, compared to $8.7 billion in the same period in 2021. Net sales for the 53rd week of fiscal 2022 were $678.1 million. Positive sales contributions from new stores and growth in same-store sales primarily drove the net sales increase. The increase was partially offset by the impact of store closures, the company said.

The retailer’s same-store sales increased 5.7% compared to the fourth quarter of 2021, driven by an increase in average transaction amount. The increase was partially offset by a modest decrease in customer traffic. Same-store sales in the quarter included growth in the consumables category. The growth was partially offset by declines in each of the apparel, home and seasonal products categories, the company said.

“Our fourth-quarter sales results were strong, although below our expectations, and we are pleased with continued market share gains in both consumables and non-consumables, as well as continued growth with new and existing customers,” said Jeff Owen, Dollar General’s CEO. “We want to thank our more than 170,000 associates for their commitment to serving our customers, communities and each other in this challenging economic and operating environment.”

Owen continued, “We made significant progress advancing our operating priorities and strategic initiatives in fiscal 2022, including executing nearly 3,000 real estate projects, completing the rollout of our non-consumables initiative, nearly tripling our pOpshelf store count, more-than-doubling the size of our private tractor fleet and opening three new distribution centers. As a result, we believe we are well-positioned to continue serving our customers with our unique combination of value and convenience in the communities we call home.”

“Looking ahead, we are excited about our plans for fiscal 2023, which include continued investment in our strategic initiatives and an incremental investment of approximately $100 million in our stores, primarily in incremental labor hours, as we look to build on our sales momentum and capture additional market share by further enhancing store standards and the in-store experience. Building on the investments we made in 2022, and the substantial progress we have made in our supply chain, we believe this incremental investment will yield strong returns as we continue creating long-term sustainable growth and value for our shareholders,” Owen said.

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Dollar General’s gross profit as a percentage of net sales was 30.9% in the quarter compared to 31.2% in the prior year period, a decrease of 35 basis points. This gross profit rate decrease was primarily attributable to an increased LIFO provision, which was driven by higher product costs; a greater proportion of sales coming from the consumables category, which generally has a lower gross profit rate than other product categories; and increases in inventory shrink, damages and markdowns. The decrease was partially offset by higher inventory markups and a reduction in transportation costs.

The company’s operating profit for Q4 increased 17.1% to $933.2 million compared to $796.7 million in Q4, 2021.

Dollar General’s net income for the quarter was $659.1 million, an increase of 10.3% compared to $597.4 million in the prior year period. Diluted EPS increased 15.2% to $2.96 for the quarter of 2022 compared to diluted EPS of $2.57 in the same period in 2021.

Fiscal year 2022 net sales increased 10.6% to $37.8 billion compared to $34.2 billion in fiscal year 2021. Net sales for the 53rd week of fiscal 2022 were $678.1 million. The net sales increase was primarily driven by positive sales contributions from new stores and growth in same-store sales. The increase was partially offset by the impact of store closures, Dollar General said.

Same-store sales increased 4.3% compared to fiscal year 2021, driven by an increase in average transaction amount. The increase was partially offset by a modest decline in customer traffic, the company said. Same-store sales in the fourth quarter of 2022 included growth in the consumables category, which was partially offset by declines in each of the apparel, home and seasonal products categories.

Gross profit as a percentage of net sales was 31.2% in fiscal year 2022, compared to 31.6% in fiscal year 2021, a decrease of 37 basis points. The gross profit rate decrease in 2022 was primarily attributable to an increased LIFO provision, which was driven higher by product costs; a greater proportion of sales coming from the consumables category, which generally has a lower gross profit rate than other product categories; and increases in inventory markdowns, damages and shrink. The decrease was partially offset by higher inventory markups and an improvement in transportation costs, Dollar General said.

Dollar General’s operating profit for fiscal year 2022 increased 3.3% to $3.3 billion compared to $3.2 billion in fiscal year 2021.

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The company reported a net income of $2.4 billion for fiscal year 2022, an increase of 0.7% compared to $2.4 billion in fiscal year 2021. Diluted EPS increased 5% to $10.68 for fiscal year 2022 compared to diluted EPS of $10.17 in fiscal year 2021. The increase in diluted EPS includes an estimated impact of the 53rd week of approximately four percentage points.

The company previously provided preliminary expectations for same-store sales growth and diluted EPS growth on Feb. 23, 2023. The company is reiterating those expectations, as well as providing additional financial guidance, and currently expects the following for fiscal 2023:

• Net sales growth in the range of approximately 5.5% to 6%, including an anticipated negative impact of approximately two percentage points due to lapping the fiscal 2022 53rd week; same-store sales growth in the range of 3.0% to 3.5%; diluted EPS growth in the range of approximately 4% to 6%, including anticipated negative impacts of the following: approximately three percentage points due to higher interest expense in fiscal 2023, and approximately four percentage points due to lapping the fiscal 2022 53rd week.

“Our fiscal 2023 full-year outlook reflects our confidence in the business, even in a potentially challenging economic and operating environment,” said John Garratt, Dollar General’s president and chief financial officer. “While we anticipate the first half of fiscal 2023 to be negatively impacted by ongoing sales mix pressures, higher shrink levels, increased damages and higher interest expense, we are confident in our full-year plans.”

Garratt added, “Our outlook for the year includes strong sales and operating profit, while also providing for investments intended to drive long-term sustainable growth. We continue to be disciplined in managing expenses and capital, while delivering on our financial priorities to drive profitable same-store sales growth, healthy new-store returns and long-term shareholder value.”