Dollar General reports Q4, fiscal year 2023 results

Dollar General today reported financial results for its fiscal year 2023 fourth quarter and fiscal year 2023.

“We were pleased to deliver fourth quarter top and bottom-line results at the upper end of our internal expectations," said Todd Vasos, CEO of Dollar General. “With customer traffic growth and market share gains during the quarter, we believe our actions are resonating with customers as they turn to Dollar General for our unique combination of value and convenience.”

Vasos added, “We have made solid progress executing on our Back to Basics strategy, which we believe supported our improved operational performance during the quarter. While we are pleased with the operational improvement we have seen, we believe that significant opportunity remains, as we continue to focus on enhancing the way we support our teams and serve our customers.”

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Vasos continued, “I want to thank our associates for their resilience and commitment to serving our customers every day. Looking ahead, we are excited about our plans for 2024 and are confident that we are taking the right actions to further solidify our foundation for future growth and create sustainable long-term value for our shareholders.”

Dollar General’s net sales decreased 3.4% to $9.9 billion in the fourth quarter of fiscal 2023 compared to $10.2 billion in the fourth quarter of fiscal 2022, which included net sales for the 53rd week of $678.1 million. The net sales decrease was primarily driven by the period containing one less week of sales than the prior year period, as well as the impact of store closures; partially offset by positive sales contributions from new stores and growth in same-store sales, the company said.

Same-store sales increased .7% compared to the fourth quarter of fiscal 2022, driven by an increase in customer traffic, partially offset by a decrease in average transaction amount. Same-store sales in the fourth quarter of fiscal 2023 included growth in the consumables category, partially offset by declines in each of the home products, seasonal, and apparel categories, Dollar General said.

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The company's gross profit as a percentage of net sales was 29.5% in the quarter of fiscal 2023 compared to 30.9% in the prior year period, a decrease of 138 basis points. This gross profit rate decrease was primarily attributable to increased shrink and inventory markdowns, lower inventory markups and a greater proportion of sales coming from the consumables category, which generally has a lower gross profit rate than other product categories. These factors were partially offset by a lower LIFO provision and decreased transportation costs, the company said.

Dollar General’s operating profit for the quarter of 2023 decreased 37.9% to $579.7 million compared to $933.2 million in the prior year period.

The company reported net income of $401.8 million for the fourth quarter of fiscal 2023, a decrease of 39.0% compared to $659.1 million in the fourth quarter of fiscal 2022. Diluted EPS decreased 38.2% to $1.83 for the fourth quarter of fiscal 2023 compared to diluted EPS of $2.96 in the prior year period.

Fiscal 2023 net sales increased 2.2% to $38.7 billion compared to $37.8 billion in fiscal 2022, which included net sales for the 53rd week of $678.1 million. The net sales increase was primarily driven by positive sales contributions from new stores and growth in same-store sales, partially offset by the impact of store closures. Same-store sales increased .2% compared to fiscal 2022, driven by an increase in customer traffic, partially offset by a decline in average transaction amount. Same-store sales increased in the consumables category, and declined in the home products, seasonal and apparel categories, Dollar General said.

Dollar General’s gross profit as a percentage of net sales was 30.3% in fiscal 2023, compared to 31.2% in fiscal 2022, a decrease of 94 basis points. The gross profit rate decrease in 2023 was primarily driven by increased shrink and inventory markdowns, lower inventory markups, a greater proportion of sales coming from the lower margin consumables sales category and increased damages. These factors were partially offset by a lower LIFO provision and decreased transportation costs, the company said.

Operating profit for fiscal 2023 decreased 26.5% to $2.4 billion compared to $3.3 billion in fiscal 2022.

The company reported net income of $1.7 billion for fiscal 2023, a decrease of 31.2% compared to $2.4 billion in fiscal 2022. Diluted EPS decreased 29.3% to $7.55 for fiscal 2023 compared to diluted EPS of $10.68 in fiscal year 2022. The decrease in diluted EPS includes estimated negative impacts of approximately four percentage points due to lapping the fiscal 2022 53rd week, and approximately four percentage points due to higher interest expense in fiscal 2023, Dollar General noted.

Regarding its fiscal year 2024 financial guidance, for fiscal year 2024, the company expects the following:

• Net sales growth in the range of approximately 6% to 6.7%;
• Same-store sales growth in the range of 2% to 2.7%; 
• Diluted EPS in the range of approximately $6.80 to $7.55; and
• The company currently anticipates an estimated negative impact to EPS of approximately 50 cents due to higher incentive compensation expense; 
• Diluted EPS guidance assumes an effective tax rate in the range of approximately 22.5% to 23.5%.

The company also is reiterating its plans to execute approximately 2,385 real estate projects in fiscal year 2024, including approximately 800 new store openings, 1,500 remodels and 85 store relocations.

For the 13-week quarter ending May 3, 2024, the company currently expects a same-store sales increase of 1.5% to 2.0%, and diluted EPS in the range of $1.50 to $1.60.

“We are encouraged by the progress we are making with our efforts in getting Back to the Basics, and we anticipate the benefit of these actions will continue to grow as we move throughout fiscal year 2024,” said Kelly Dilts, chief financial officer of Dollar General. “While we anticipate the first quarter will be pressured by our lowest expected same-store-sales increase of any quarter in fiscal 2024, as well as the annualization of prior year headwinds such as retail labor and shrink, we are focused on delivering our full year plans, including anticipated strong EPS growth in the back half of the year.”