Dollar General Corporation (NYSE:DG) Q2 2024 Results Conference Call December 5, 2024 9:00 AM ET Company Participants Kevin Walker - Vice President of Investor Relations Todd Vasos - Chief Executive Officer Kelly Dilts - Chief Financial Officer Conference Call Participants Simeon Gutman - Morgan Stanley Michael Lasser - UBS Matthew Boss - JPMorgan Chase Kelly Bania - BMO Capital Markets Rupesh Parikh - Oppenheimer Zhihan Ma - Bernstein Kate McShane - Goldman Sachs Karen Short - Melius Research Seth Sigman - ...

Dollar General (DG) came out with quarterly earnings of $0.89 per share, missing the Zacks Consensus Estimate of $0.96 per share. This compares to earnings of $1.26 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -7.29%. A quarter ago, it was expected that this discount retailer would post earnings of $1.79 per share when it actually produced earnings of $1.70, delivering a surprise of -5.03%.Over the last four quarters, the c ...

Part I [Financial Statements](index=10&type=section&id=Item%201.%20Financial%20Statements) This section presents Dollar General Corporation's unaudited condensed consolidated financial statements for the quarterly period ended November 1, 2024, along with accompanying notes [Condensed Consolidated Balance Sheets](index=10&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity as of November 1, 2024 Balance Sheet Highlights (as of Nov 1, 2024 vs. Feb 2, 2024) | Metric | Nov 1, 2024 (in thousands) | Feb 2, 2024 (in thousands) | | :--- | :--- | :--- | | **Total Current Assets** | $8,176,516 | $8,010,724 | | **Total Assets** | $31,460,415 | $30,795,591 | | **Total Current Liabilities** | $7,110,697 | $6,725,701 | | **Total Liabilities** | $24,117,830 | $24,046,472 | | **Total Shareholders' Equity** | $7,342,585 | $6,749,119 | [Condensed Consolidated Statements of Income](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net income Income Statement Summary (Unaudited, in thousands, except per share amounts) | Metric | 13 Weeks Ended Nov 1, 2024 | 13 Weeks Ended Nov 3, 2023 | 39 Weeks Ended Nov 1, 2024 | 39 Weeks Ended Nov 3, 2023 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $10,183,428 | $9,694,082 | $30,307,810 | $28,833,095 | | **Gross Profit** | $2,936,300 | $2,812,528 | $8,987,928 | $8,812,688 | | **Operating Profit** | $323,802 | $433,474 | $1,419,868 | $1,866,646 | | **Net Income** | $196,529 | $276,246 | $934,036 | $1,259,461 | | **Diluted EPS** | $0.89 | $1.26 | $4.24 | $5.73 | [Condensed Consolidated Statements of Cash Flows](index=14&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the inflows and outflows of cash from operating, investing, and financing activities for the specified periods Cash Flow Summary (For the 39 weeks ended, in thousands) | Cash Flow Activity | Nov 1, 2024 | Nov 3, 2023 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $2,195,163 | $1,442,019 | | **Net cash used in investing activities** | ($1,034,970) | ($1,235,544) | | **Net cash used in financing activities** | ($1,160,219) | ($222,604) | | **Net (decrease) in cash** | ($26) | ($16,129) | [Notes to Condensed Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides additional details and explanations for the figures presented in the condensed consolidated financial statements - The company faces putative shareholder class action lawsuits alleging federal securities law violations related to misrepresentation of store labor, inventory, and pricing practices on financial results[68](index=68&type=chunk) Net Sales by Product Category (39 Weeks Ended) | Product Category | Nov 1, 2024 (in thousands) | Nov 3, 2023 (in thousands) | | :--- | :--- | :--- | | Consumables | $25,053,726 | $23,445,031 | | Seasonal | $2,958,509 | $2,979,474 | | Home products | $1,481,369 | $1,582,305 | | Apparel | $814,206 | $826,285 | | **Total Net Sales** | **$30,307,810** | **$28,833,095** | - The company did not repurchase any shares of its common stock during the 39-week periods ended November 1, 2024, and November 3, 2023[77](index=77&type=chunk) - A quarterly cash dividend of **$0.59 per share** was declared in December 2024, payable in January 2025, consistent with payments for the first three quarters of 2024[78](index=78&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for the third quarter and first 39 weeks of fiscal 2024, covering operational results, strategic initiatives, and liquidity, highlighting key drivers and challenges [Executive Overview](index=27&type=section&id=Executive%20Overview) This section provides a high-level summary of the company's business, strategic priorities, and key factors impacting its financial outlook - Dollar General operates **20,523 stores** as of November 1, 2024, positioning it as the largest U.S. discount retailer by store count, serving value-conscious customers[85](index=85&type=chunk)[86](index=86&type=chunk) - Core operating priorities include driving profitable sales growth, capturing growth opportunities, enhancing its low-cost operator position, and investing in its teams[88](index=88&type=chunk) - Significant inventory shrink and damages are anticipated to materially pressure full-year fiscal 2024 financial results, despite mitigation efforts[92](index=92&type=chunk) Real Estate Project Plans | Fiscal Year | New Stores | Remodels | Relocations | | :--- | :--- | :--- | :--- | | **2024** | ~730 | ~1,620 | ~85 | | **2025** | ~575 (plus up to 15 in Mexico) | ~2,000 (full) + ~2,250 (partial) | ~45 | - The company incurred **$32.7 million** in incremental SG&A expenses in Q3 2024 due to southern U.S. hurricanes, with an anticipated additional negative impact of approximately **$10 million** in Q4 2024[105](index=105&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including net sales, gross profit, and operating expenses, for the reported periods - **Q3 2024 net sales** increased **5.0%** to **$10.18 billion**, driven by new stores and a **1.3% same-store sales** increase, comprising a **1.1% rise in average transaction amount** and **0.3% in customer traffic**[111](index=111&type=chunk)[121](index=121&type=chunk) - **Q3 2024 gross profit rate** decreased by **18 basis points** to **28.8%**, primarily due to increased markdowns, higher inventory damages, and a sales mix shift towards lower-margin consumables[112](index=112&type=chunk)[122](index=122&type=chunk) - **Q3 2024 SG&A** as a percentage of sales increased by **111 basis points** to **25.7%**, mainly due to **$32.7 million** in hurricane-related costs, higher retail labor, and increased depreciation and amortization[113](index=113&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - For the **39 weeks ended 2024**, net sales grew **5.1%**, driven by new stores and a **1.4% same-store sales** increase, primarily from a **1.8% increase in customer traffic**[127](index=127&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to generate and manage cash, including its capital expenditures, debt, and share repurchase plans - **Cash flow from operations** for the 39-week period of 2024 was **$2.195 billion**, a **52.2% increase** from 2023, driven by improved inventory management and accounts payable timing[115](index=115&type=chunk)[140](index=140&type=chunk) - Capital expenditures for fiscal 2024 are projected to be between **$1.3 billion and $1.4 billion**, allocated for store growth, remodels, and supply chain initiatives[144](index=144&type=chunk) - No share repurchases occurred in the first three quarters of 2024, nor are they planned for Q4, to preserve the investment-grade credit rating and financial flexibility, with approximately **$1.38 billion** remaining authorization[146](index=146&type=chunk) Credit Ratings | Rating Agency | Senior Unsecured Debt Rating | Commercial Paper Rating | Outlook | | :--- | :--- | :--- | :--- | | Moody's | Baa2 | P-2 | Negative outlook | | Standard & Poor's | BBB | A-2 | Negative outlook | [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section reports no material changes to the company's market risk disclosures since its Annual Report on Form 10-K for the fiscal year ended February 2, 2024 - No material changes have occurred in market risk disclosures compared to the Annual Report on Form 10-K for the fiscal year ended February 2, 2024[147](index=147&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of November 1, 2024, with no material changes to internal control over financial reporting during the quarter - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[149](index=149&type=chunk) - No material changes occurred in the company's internal control over financial reporting during the quarter ended November 1, 2024[150](index=150&type=chunk) Part II Other Information [Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference information on legal proceedings from Note 7 of the condensed consolidated financial statements in Part I, Item 1 - Information on legal proceedings is incorporated by reference from Note 7 of the unaudited condensed consolidated financial statements[153](index=153&type=chunk) [Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to risk factors from its Annual Report on Form 10-K, except as discussed in the MD&A section of this Form 10-Q - No material changes to risk factors have occurred from the Annual Report on Form 10-K, except as discussed in the MD&A's 'Executive Overview'[154](index=154&type=chunk) [Other Information](index=40&type=section&id=Item%205.%20Other%20Information) This section discloses that no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended November 1, 2024 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended November 1, 2024[155](index=155&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section refers to the Exhibit Index, which lists all documents filed as exhibits with this Form 10-Q - A list of all exhibits filed with this quarterly report is provided in the Exhibit Index[156](index=156&type=chunk)[158](index=158&type=chunk)

[Third Quarter 2024 Financial Results](index=1&type=section&id=Third%20Quarter%202024%20Financial%20Results) [Q3 2024 Performance Highlights](index=1&type=section&id=Q3%202024%20Performance%20Highlights) Dollar General's Q3 2024 net sales grew 5.0% to $10.2 billion with 1.3% same-store sales growth, yet operating profit declined 25.3% and diluted EPS fell 29.4% to $0.89, impacted by hurricane expenses Q3 2024 Key Financial Metrics | Metric | Q3 2024 | Change vs. Q3 2023 | | :--- | :--- | :--- | | Net Sales | $10.2 Billion | +5.0% | | Same-Store Sales | +1.3% | - | | Operating Profit | $323.8 Million | -25.3% | | Diluted EPS | $0.89 | -29.4% | | Cash Flows From Operations (YTD) | $2.2 Billion | +52.2% | - Same-store sales growth of **1.3%** was composed of a **1.1%** increase in average transaction amount and a **0.3%** increase in customer traffic[4](index=4&type=chunk) - Sales growth was driven by the consumables category, while the home, seasonal, and apparel categories experienced declines[4](index=4&type=chunk) - CEO Todd Vasos noted that despite a financially constrained core customer, the company's "Back to Basics" efforts helped improve execution and the in-store customer experience[3](index=3&type=chunk) [Detailed Financial Analysis](index=1&type=section&id=Detailed%20Financial%20Analysis) Gross profit margin contracted 18 basis points to 28.8% due to markdowns and consumables mix, while SG&A rose 111 basis points to 25.7% of sales, leading to a 25.3% operating profit decline to $323.8 million - Gross profit rate decreased by **18 basis points**, attributed to increased markdowns, higher inventory damages, and a greater proportion of sales from consumables, partially offset by higher inventory markups and lower shrink and transportation costs[5](index=5&type=chunk) - SG&A expenses increased as a percentage of sales, primarily due to **$32.7 million** in hurricane-related costs, retail labor, and depreciation[6](index=6&type=chunk) Q3 2024 Profitability vs. Q3 2023 | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Operating Profit | $323.8 M | $433.5 M | -25.3% | | Net Income | $196.5 M | $276.2 M | -28.9% | | Diluted EPS | $0.89 | $1.26 | -29.4% | [Balance Sheet and Shareholder Returns](index=2&type=section&id=Balance%20Sheet%20and%20Shareholder%20Returns) As of November 1, 2024, merchandise inventories decreased 7.0% per store to $7.1 billion, year-to-date capital expenditures reached $1.0 billion, and a $0.59 per share dividend was declared with no Q3 share repurchases - Total merchandise inventories decreased to **$7.1 billion**, representing a **7.0%** reduction on a per-store basis compared to the previous year[10](index=10&type=chunk) - Year-to-date capital expenditures totaled **$1.0 billion**, with significant investments in store improvements (**$451M**), distribution projects (**$288M**), and new store facilities (**$259M**)[11](index=11&type=chunk) - The company did not repurchase any shares in Q3 2024, with **$1.4 billion** remaining under the current authorization[12](index=12&type=chunk) - A quarterly cash dividend of **$0.59 per share** was declared by the Board of Directors[14](index=14&type=chunk) [Outlook and Future Plans](index=2&type=section&id=Outlook%20and%20Future%20Plans) [Fiscal Year 2024 Financial Guidance (Updated)](index=2&type=section&id=Fiscal%20Year%202024%20Financial%20Guidance%20%28Updated%29) Dollar General updated its FY2024 guidance, adjusting net sales growth to 4.8%-5.1% and diluted EPS to $5.50-$5.90, incorporating hurricane expenses while maintaining capital expenditure plans - Updated guidance includes the negative impact of **$32.7 million** in Q3 hurricane-related expenses and an estimated **$10 million** impact in Q4[15](index=15&type=chunk) Updated FY 2024 Guidance | Metric | Previous Guidance | Updated Guidance | | :--- | :--- | :--- | | Net Sales Growth | 4.7% to 5.3% | 4.8% to 5.1% | | Same-Store Sales Growth | 1.0% to 1.6% | 1.1% to 1.4% | | Diluted EPS | $5.50 to $6.20 | $5.50 to $5.90 | - The company maintains its expectation for **$1.3 billion to $1.4 billion** in capital expenditures and **2,435** real estate projects (**730** new stores, **1,620** remodels, **85** relocations) for fiscal 2024[16](index=16&type=chunk) [Fiscal Year 2025 Real Estate and Growth Plan](index=3&type=section&id=Fiscal%20Year%202025%20Real%20Estate%20and%20Growth%20Plan) For FY2025, Dollar General plans approximately 4,885 real estate projects, including 575 new U.S. stores, 2,000 full remodels, and 2,250 "Project Elevate" lighter-touch remodels to enhance customer experience - The company is introducing "Project Elevate," a new remodel initiative targeting mature stores with lighter-touch updates to enhance the customer and associate experience[17](index=17&type=chunk) FY 2025 Real Estate Project Plans | Project Type | Planned Number | | :--- | :--- | | New Store Openings (U.S.) | ~575 | | New Store Openings (Mexico) | up to 15 | | Full Remodels | ~2,000 | | Project Elevate Remodels | ~2,250 | | Store Relocations | ~45 | | **Total Projects** | **~4,885** | [Financial Statements](index=7&type=section&id=Financial%20Statements) [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of November 1, 2024, total assets increased to $31.5 billion, merchandise inventories decreased to $7.1 billion, total liabilities remained stable at $24.1 billion, and shareholders' equity grew to $7.3 billion Key Balance Sheet Items (in thousands) | Account | Nov 1, 2024 | Nov 3, 2023 | | :--- | :--- | :--- | | Merchandise Inventories | $7,118,974 | $7,356,065 | | Total Current Assets | $8,176,516 | $8,271,078 | | Total Assets | $31,460,415 | $30,624,626 | | Total Liabilities | $24,117,830 | $24,172,742 | | Total Shareholders' Equity | $7,342,585 | $6,451,884 | [Consolidated Statements of Income](index=8&type=section&id=Consolidated%20Statements%20of%20Income) Q3 2024 net sales rose to $10.2 billion, but increased COGS and SG&A led to operating profit declining to $323.8 million and net income falling to $196.5 million Q3 Income Statement Summary (in thousands) | Account | Q3 2024 (13 weeks) | Q3 2023 (13 weeks) | | :--- | :--- | :--- | | Net Sales | $10,183,428 | $9,694,082 | | Gross Profit | $2,936,300 | $2,812,528 | | Operating Profit | $323,802 | $433,474 | | Net Income | $196,529 | $276,246 | Year-to-Date Income Statement Summary (in thousands) | Account | YTD 2024 (39 weeks) | YTD 2023 (39 weeks) | | :--- | :--- | :--- | | Net Sales | $30,307,810 | $28,833,095 | | Gross Profit | $8,987,928 | $8,812,688 | | Operating Profit | $1,419,868 | $1,866,646 | | Net Income | $934,036 | $1,259,461 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Year-to-date net cash from operations significantly increased to $2.2 billion, while investing activities used $1.0 billion and financing activities used $1.2 billion, primarily for debt and dividends Year-to-Date Cash Flow Summary (in thousands) | Activity | YTD 2024 (39 weeks) | YTD 2023 (39 weeks) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $2,195,163 | $1,442,019 | | Net Cash used in Investing Activities | ($1,034,970) | ($1,235,544) | | Net Cash used in Financing Activities | ($1,160,219) | ($222,604) | | Net (Decrease) in Cash | ($26) | ($16,129) | [Selected Additional Information](index=10&type=section&id=Selected%20Additional%20Information) Q3 2024 sales saw Consumables grow 6.4% while other categories declined, and the company expanded its store count to 20,523 with a net addition of 537 new stores year-to-date Q3 2024 Sales by Category (% Change YoY) | Category | % Change | | :--- | :--- | | Consumables | +6.4% | | Seasonal | 0.0% | | Home products | -2.3% | | Apparel | -1.2% | | **Total Net Sales** | **+5.0%** | Store Activity (39 Weeks Ended Nov 1, 2024) | Activity | Number | | :--- | :--- | | Beginning Store Count | 19,986 | | New Store Openings | 617 | | Store Closings | (80) | | **Ending Store Count** | **20,523** | [Other Information](index=4&type=section&id=Other%20Information) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section cautions that forward-looking statements regarding the company's outlook and plans are subject to numerous risks and uncertainties, including economic factors and competitive pressures, which could cause actual results to differ materially - The report contains forward-looking statements regarding the company's outlook, strategy, initiatives, and plans, which are not guarantees of future performance[19](index=19&type=chunk) - A wide range of important factors could cause actual results to differ, including economic conditions (inflation, interest rates), failure to execute strategies, competitive pressures, supply chain disruptions, and inventory shrinkage[19](index=19&type=chunk)[20](index=20&type=chunk) [About Dollar General Corporation](index=6&type=section&id=About%20Dollar%20General%20Corporation) Dollar General, operating 20,523 stores across the U.S. and Mexico as of November 1, 2024, positions itself as "America's neighborhood general store" with a mission of "Serving Others" by offering essential products - As of November 1, 2024, the company operates **20,523** stores, including Dollar General, DG Market, DGX, pOpshelf, and Mi Súper Dollar General formats[23](index=23&type=chunk) - The company's mission is "Serving Others" by providing affordable products, career opportunities, and community support[23](index=23&type=chunk)

If you're looking for extreme bargain buys in the markets, you may want to go further than just searching for stocks that are trading near their 52-week lows. To find deeply discounted investment options, it may be worth considering stocks that are at multiyear lows. There is usually considerable risk with these types of stocks as they are often facing multiple headwinds. But it also means that for a contrarian investor who's betting on a turnaround, the upside can also be significant.Two retail stocks whic ...

Wall Street analysts expect Dollar General (DG) to post quarterly earnings of $0.96 per share in its upcoming report, which indicates a year-over-year decline of 23.8%. Revenues are expected to be $10.14 billion, up 4.6% from the year-ago quarter.The consensus EPS estimate for the quarter has undergone an upward revision of 0.5% in the past 30 days, bringing it to its present level. This represents how the covering analysts, as a whole, have reassessed their initial estimates during this timeframe.Prior to ...

The latest trading session saw Dollar General (DG) ending at $77.27, denoting a +1.32% adjustment from its last day's close. The stock exceeded the S&P 500, which registered a gain of 0.56% for the day. Meanwhile, the Dow gained 0.42%, and the Nasdaq, a tech-heavy index, added 0.83%. Coming into today, shares of the discount retailer had lost 4.72% in the past month. In that same time, the Retail-Wholesale sector gained 5.95%, while the S&P 500 gained 3.11%. Market participants will be closely following the ...

Wall Street expects a year-over-year decline in earnings on higher revenues when Dollar General (DG) reports results for the quarter ended October 2024. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on December 5. ...

The most recent trading session ended with Dollar General (DG) standing at $77.09, reflecting a +1.59% shift from the previouse trading day's closing. This change outpaced the S&P 500's 0.39% gain on the day. Elsewhere, the Dow lost 0.13%, while the tech-heavy Nasdaq added 0.6%.The discount retailer's stock has dropped by 5.86% in the past month, falling short of the Retail-Wholesale sector's gain of 1.99% and the S&P 500's gain of 1.06%.The upcoming earnings release of Dollar General will be of great inter ...

A downtrend has been apparent in Dollar General (DG) lately. While the stock has lost 7.9% over the past week, it could witness a trend reversal as a hammer chart pattern was formed in its last trading session. This could mean that the bulls have been able to counteract the bears to help the stock find support.While the formation of a hammer pattern is a technical indication of nearing a bottom with potential exhaustion of selling pressure, rising optimism among Wall Street analysts about the future earning ...