Dollar General Corporation (NYSE:DG) reported first-quarter fiscal 2023 earnings that fell short of the Consensus Estimate on both the revenue and bottom lines. Year on year, net sales increased but earnings decreased. This Goodlettsville, Tennessee-based company had same-store sales growth and increased its market share in consumables.

Let’s Go a Little Further

The quarterly earnings of $2.34 per share fell short of the Consensus Estimate of $2.38 and down 2.9% from the previous year.

Net sales of $9,342.8 million increased 6.8% year on year due to sales contributions from new stores and growth in same-store sales, which were partially offset by the impact of store closures. The top line fell short of the $9,469 million Consensus Estimate.

Dollar General’s same-store sales climbed 1.6% year over year, owing to a higher average transaction amount offset in part by a decrease in customer traffic. Same-store sales increased in the Consumables category while falling in the Seasonal, Apparel, and Home Products categories.

Consumables sales climbed 8.9% year on year to $7,582.9 million, while Seasonal sales increased 0.1% to $962.7 million. However, sales of Home Products fell 1.6% to $531.2 million, while Apparel sales fell 8.1% to $266.1 million.

In the reporting quarter, gross profit climbed 7.9% to $2,955.5 million, while gross margin increased 30 basis points to 31.6%. The increased gross profit margin can be ascribed to higher inventory markups, lower transportation costs, and a lower LIFO provision. Increased shrinkage, markdowns, inventory damages, and a higher proportion of sales from the consumables category partially offset this.

SG&A spending grew 90 basis points to 23.7% of net sales in the quarter. The operating profit fell 0.7% to $740.9 million.

Store Improvements

Dollar General opened 212 new stores, modified 582 others, and relocated 22 others in the first quarter of fiscal 2023. The business expects to complete 3,110 real estate projects in the United States in fiscal 2023, including 990 new store openings, 2,000 remodels, and 120 store relocations.

Other Financial Information

Dollar General concluded the quarter with $313.1 million in cash and cash equivalents, $7,028.8 million in long-term obligations, and $5,935.3 million in shareholders’ equity.

During the fiscal first quarter, management spent $363 million on capital expenditures. Capital expenditures for fiscal 2023 are expected to be in the $1.6-$1.7 billion range, down from the $1.8-$1.9 billion previously projected.

Dollar General did not buy back shares during the first quarter of fiscal 2023. At the end of the quarter, the corporation had $1.4 billion remaining on its authorization. The business presently anticipates no share repurchases in fiscal 2023, compared to a $500 million share repurchase previously anticipated. Dollar General paid a quarterly dividend of 59 cents per share and a total payout of $129.4 million in the first quarter of fiscal 2023.

Outlook

Dollar General anticipates net sales growth of 3.5% to 5% in fiscal 2023, down from 5.5% to 6% previously forecast. Both predictions assumed a two-percentage-point negative impact from the overlapping of the 53rd week in fiscal 2022. The company now expects same-store sales growth of 1%-2%, down from its earlier projection of 3%-3.5%.

The company now forecasts earnings per share to be flat to down around 8% in fiscal year 2023, compared to the 4%-6% rise predicted previously. The projection incorporates a four percentage point negative impact from higher interest expenses in fiscal 2023 and a four percentage point negative impact from missing the fiscal 2022 53rd week.

Dollar General stock has dropped 7% in the last three months, compared to a 3.3% drop in the industry.

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