Dollar General reports Q3 results
A significant headwind from inventory shrink dampened Dollar General's Q3 results.
In releasing the results, Todd Vasos, CEO of Dollar General said, “I am excited to be back at Dollar General and working with the team to fulfill our mission of Serving Others every day. Over the last several weeks, we have spent significant time reviewing all areas of the business, and we have identified key opportunities for improvement both in the near term and over the longer term. Moving forward, our entire team is laser focused and moving with urgency to take the actions we have identified to drive operational excellence for our customers and employees.”
Vasos continued, While we are not satisfied with our financial results for the third quarter, including a significant headwind from inventory shrink, we are pleased with the momentum in some of the underlying sales trends, including positive customer traffic, as well as market share gains in both dollars and units. We continue to believe our model is relevant in all economic cycles, and we are working diligently to further enhance our unique combination of value and convenience.”
“With that in mind, we are pleased to announce today our real estate growth plans for fiscal year 2024, which include approximately 2,385 projects in total, including 800 new stores, 1,500 remodels, and 85 relocations. This is a modest slow down compared to the number of projects in recent years, which we believe is prudent in this environment. We are excited about the opportunities these projects provide to serve both new and existing customers, while also driving strong financial returns for the business and laying the foundation for future growth. Looking ahead, we are confident in this business model and its ability to create long-term shareholder value,” Vasos concluded.
Dollar General’s net sales increased 2.4% to $9.7 billion in the third quarter of 2023 compared to $9.5 billion in the prior year period. The net sales increase was primarily driven by positive sales contributions from new stores. The increase was partially offset by the decline in same-store sales and the impact of store closures, the company said.
The retailer’s same-store sales decreased 1.3% compared to the third quarter of 2022, driven by a decline in average transaction amount. The decrease was partially offset by an increase in customer traffic, Dollar General said.
[Read more: Dollar General sees same store sales dip in Q2]
Same-store sales in the third quarter of 2023 included declines in each of the home, seasonal, apparel and consumable categories.
Dollar General’s gross profit as a percentage of net sales was 29% in the third quarter of 2023 compared to 30.5% in the prior year period, a decrease of 147 basis points. This gross profit rate decrease was primarily attributable to increased shrink, lower inventory markups and increased markdowns. These factors were partially offset by a lower LIFO provision and decreased transportation costs, Dollar General noted.
The retailer’s operating profit for the third quarter of 2023 decreased 41.1% to $433.5 million compared to $735.5 million in the third quarter of 2022.
The company reported net income of $276.2 million for the third quarter of 2023, a decrease of 47.5% compared to $526.2 million in the third quarter of 2022. Diluted EPS decreased 45.9% to $1.26 for the third quarter of 2023 compared to diluted EPS of $2.33 in the prior year period.
[Read more: Dollar General reaffirms store opening plans despite Q4 sales decrease]
In releasing its fiscal year 2023 guidance, Dollar General said it continues to expect net sales growth in the range of 1.5% to 2.5%, which continues to include an anticipated negative impact of approximately two percentage points due to lapping the fiscal 2022 53rd week.
Dollar General expects same-store sales growth in the range of a decline of approximately 1.0% to flat.
The company expects diluted EPS in the range of approximately $7.10 to $7.60, or a decline of 34% to 29%.