Finanzas: Dollar General Reports Second Quarter 2016

 

Net Sales Increased 5.8%; Same-Store Sales Increased 0.7%

Diluted Earnings Per Share Increased 14% to $1.08; Year to Date Through the Second Quarter, Diluted Earnings Per Share Increased 18% to $2.11

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Cash From Operations Increased 36% Year to Date Through the Second Quarter

$597 Million of Capital Returned to Shareholders Year to Date Through the Second Quarter

Board of Directors Approves Incremental $1.0 Billion Share Repurchase Authorization; Declares Third Quarter 2016 Dividend

Confirms 2016 Full Year Diluted EPS Guidance of 10% to 15% Growth

Dollar General Corporation (DG) (NYSE: DG) reported financial results for its fiscal 2016 second quarter (13 weeks) ended July 29, 2016.

“We are pleased with our 2016 second quarter diluted earnings per share growth of 14 percent over the 2015 second quarter, although our same-store sales performance fell short of our expectations. Retail food deflation and a reduction in both SNAP participation rates and benefit levels, coupled with unseasonably mild spring weather, proved to be stronger than expected headwinds to our business. The competitive environment also intensified in select regions of the country. Importantly, even amidst a challenging sales environment, we effectively managed our gross profit margin and leveraged our selling, general and administrative expense as a percent of sales,” said Todd Vasos, Dollar General’s chief executive officer.

“For the second half of the year, we have action plans across both merchandising and store operations intended to drive same-store sales while maintaining strict expense control discipline. Looking ahead, we remain focused on our long-term strategy to invest for growth while also returning cash to shareholders through consistent share repurchases and anticipated quarterly dividends.”

LEA TAMBIÉN: Finanzas: Dollar Tree, Inc. Reports Results for the Second Quarter Fiscal 2016

Second Quarter 2016 Highlights

The Company’s net income was $307 million, or $1.08 per diluted share, in the 2016 second quarter, compared to net income of $282 million, or $0.95 per diluted share, in the 2015 second quarter.

Net sales increased 5.8 percent to $5.39 billion in the 2016 second quarter compared to $5.10 billion in the 2015 second quarter. Same-store sales increased 0.7 percent driven primarily by an increase in average transaction amount offset by a decline in traffic. Same-store sales increases were driven by positive results in the consumables category accompanied by results in the seasonal category that were flat when compared to the 2015 second quarter, offset by negative results in the apparel and home categories. The net sales increase was also positively affected by sales from new stores, modestly offset by sales from closed stores.

Gross profit, as a percentage of net sales, was 31.2 percent in the 2016 second quarter, an increase of 2 basis points from the 2015 second quarter. The gross profit rate increase was primarily attributable to higher initial inventory markups and lower transportation costs, partially offset by higher markdowns, a greater proportion of sales of consumables merchandise, which have a lower gross profit rate than non-consumables merchandise, and increased inventory shrink.

Selling, general and administrative expense (“SG&A”) as a percentage of net sales was 21.7 percent in the 2016 second quarter compared to 21.8 percent in the 2015 second quarter, a decrease of 8 basis points. The SG&A decrease was primarily attributable to lower administrative payroll, advertising, and incentive compensation expenses. Partially offsetting these items were retail labor and occupancy costs, each of which increased at a rate greater than the increase in net sales.

The effective income tax rate was 36.8 percent for the 2016 second quarter compared to a rate of 38.0 percent for the 2015 second quarter. The effective income tax rate was lower in the 2016 second quarter due primarily to the recognition of additional amounts of the Work Opportunity Tax Credit (“WOTC”) in the 2016 second quarter. The December 2015 reenactment of the WOTC allowed the Company to receive credits for eligible employees hired during the second quarter of 2016. By comparison, in the 2015 second quarter, only a limited number of employees (hired on or before December 31, 2014) were eligible for the credit.

26-Week Period Highlights

For the 2016 26-week period, net sales increased 6.4 percent over the comparable 2015 period to $10.7 billion. Same-store sales increased 1.4 percent. Increases in customer traffic and average transaction amount contributed to the increase in same-store sales. The remainder of the net sales increase was attributable to new stores, modestly offset by closed stores.

Gross profit increased by 6.7 percent and, as a percentage of net sales, increased by 9 basis points to 30.9 percent in the 2016 26-week period compared to the 2015 period. The gross profit rate increase in the 2016 period as compared to the 2015 period was primarily attributable to higher initial inventory markups and lower transportation costs, partially offset by higher markdowns, a greater proportion of sales of consumables merchandise, which have a lower gross profit rate than non-consumables merchandise, and increased inventory shrink.

SG&A was 21.6 percent of net sales in the 2016 period compared to 21.8 percent in the 2015 period, a decrease of 18 basis points. The SG&A decrease was primarily attributable to lower administrative payroll, utilities, advertising and incentive compensation expenses. Partially offsetting these items were retail labor and occupancy costs, each of which increased at a rate greater than the increase in net sales.

The effective income tax rate for the 2016 period was 36.1 percent compared to a rate of 37.8 percent for the 2015 period. The effective income tax rate was lower in the 2016 first half due primarily to the Company’s early adoption of an amended accounting standard for employee share-based payments and the recognition of additional amounts of the WOTC in the 2016 first half. The December 2015 reenactment of the WOTC allowed the Company to receive credits for eligible employees hired during the first half of 2016. By comparison, in the first half of 2015, only a limited number of employees (hired on or before December 31, 2014) were eligible for the credit.

For the 2016 26-week period, the Company reported net income of $602 million, or $2.11 per diluted share, compared to net income of $536 million, or $1.79 per diluted share, for the 26-week 2015 period, an increase in diluted EPS of 18%.

Merchandise Inventories

As of July 29, 2016, total merchandise inventories, at cost, were $3.27 billion compared to $3.03 billion as of July 31, 2015, an increase of 1.6 percent on a per-store basis.

Capital Expenditures

During the 2016 26-week period, the Company opened 510 new stores and remodeled or relocated 594 stores. Total additions to property and equipment in the 2016 26-week period were $268 million, including: $81 million for distribution and transportation-related capital expenditures; $77 million for improvements, upgrades, remodels and relocations of existing stores; $55 million related to new leased stores, primarily for leasehold improvements, fixtures and equipment; $37 million for stores purchased or built by the Company; and $14 million for information systems upgrades and technology-related projects.

Share Repurchases

During the 2016 second quarter, the Company repurchased 2.5 million shares of its common stock under its share repurchase program at an average price of $88.55 per share. For the 2016 26-week period, the Company repurchased 5.2 million shares of its common stock under the share repurchase program at an average price of $86.61 per share. Since the inception of the share repurchase program in December 2011 through the end of the 2016 second quarter, the Company has repurchased 67.3 million shares totaling $4.0 billion, at an average price of $59.93 per share.

On August 24, 2016, the Board of Directors authorized an additional $1.0 billion for share repurchases, increasing the total authorization for future repurchases to approximately $1.4 billion. The authorization has no expiration date.

Dividend

On August 24, 2016, the Board of Directors declared its regular quarterly cash dividend of $0.25 per share on the Company’s common stock. The third quarter dividend will be payable on September 28, 2016 to shareholders of record at the close of business on September 14, 2016.

Financial Outlook

On March 10, 2016, the Company stated that it intended to update its diluted EPS guidance for the 53-weeks ending February 3, 2017 (“fiscal 2016”) only if the Company no longer reasonably expects diluted EPS to fall within the 10 percent to 15 percent range outlined in the long-term growth model included in its press release issued on that date. The Company continues to forecast diluted EPS for fiscal 2016 within this range of 10 percent to 15 percent. Additionally, capital expenditures for fiscal 2016 are now expected to be in the range of $580 million to $630 million to reflect the purchase of 42 Walmart Express stores, compared to the prior forecast of $550 million to $600 million. The Company does not intend, and specifically disclaims any duty, to update its dollar range for expected fiscal 2016 capital expenditures unless otherwise required by applicable securities laws.

As stated in the March 10, 2016 press release, the Company does not intend, and specifically disclaims any duty, to update its expectations regarding where in the range of guidance fiscal 2016 net sales, same-store sales or diluted EPS may fall, or to update any component of the growth model outlined in that press release, other than diluted EPS range as specified herein. However, the Company does intend to discuss square footage growth from time to time.

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Fuente: Seeking Alpha


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