Dollar

Dollar General Corporation has reported financial results for its fiscal year 2021 third quarter ended October 29.

“We are pleased with our third quarter results, and I want to thank our associates for their unwavering commitment to meeting the needs of our customers, communities, and each other,” said Todd Vasos, Dollar General’s chief executive officer. “During the quarter, we made meaningful progress advancing our key initiatives, while continuing to successfully deliver for our customers, despite a challenging operating environment.

“We are excited to announce our real estate growth plans for fiscal year 2022, which consist of nearly 3,000 real estate projects in total, including 1,110 new stores. These plans include the acceleration of our pOpshelf store concept, as we expect to nearly triple our store count next year. Importantly, given the sustained and positive performance of our pOpshelf concept, we plan to further accelerate the pace of new store openings as we move ahead, targeting a total of approximately 1,000 pOpshelf locations by fiscal year end 2025.”

Dollar General has five stores in Columbia County.

Third Quarter 2021 Highlights

Net sales increased 3.9% to $8.5 billion in the third quarter of 2021 compared to $8.2 billion in the third quarter of 2020. The net sales increase was primarily driven by positive sales contributions from new stores, partially offset by a slight decline in same-store sales and the impact of store closures. Same-store sales decreased 0.6% compared to the third quarter of 2020, driven by a decline in customer traffic, partially offset by an increase in average transaction amount. Same-store sales in the third quarter of 2021 included a decline in the apparel and seasonal categories, partially offset by growth in the consumables and home products categories.

Gross profit as a percentage of net sales was 30.8% in the third quarter of 2021 compared to 31.3% in the third quarter of 2020, a decrease of 57 basis points. This gross profit rate decrease was primarily attributable to an increased LIFO provision, increased transportation costs, a greater proportion of sales coming from the consumables category, which generally has a lower gross profit rate than other product categories, and an increase in inventory damages. These factors were partially offset by higher inventory markups and a reduction in inventory shrink as a percentage of net sales.

Selling, general and administrative expenses as a percentage of net sales were 22.9% in the third quarter of 2021 compared to 21.9% in the third quarter of 2020, an increase of 105 basis points. The primary expenses that represented a greater percentage of net sales in the current year period were retail labor, store occupancy costs, depreciation and amortization, repairs and maintenance, employee benefits, and supplies, partially offset by a reduction in miscellaneous Covid-related expenses.

Operating profit for the third quarter of 2021 decreased 13.9% to $665.6 million compared to $773.1 million in the third quarter of 2020. The third quarter of 2020 included approximately $38 million of incremental investments the company made in response to the COVID-19 pandemic, primarily driven by $25 million in frontline employee appreciation bonuses, as well as measures taken to further protect the health and safety of employees and customers.

The effective income tax rate in the third quarter of 2021 was 22.2% compared to 21.6% in the third quarter of 2020. This higher effective income tax rate was primarily due to a reduced benefit associated with share-based compensation, an increase in uncertain tax positions and changes in the state effective tax rate, partially offset by a greater benefit associated with federal tax credits.

The company reported net income of $487.0 million for the third quarter of 2021, a decrease of 15.2% compared to $574.3 million in the third quarter of 2020. Diluted EPS decreased 10.0% to $2.08 for the third quarter of 2021 compared to diluted EPS of $2.31 in the third quarter of 2020.

As of October 29, total merchandise inventories, at cost, were $5.3 billion compared to $5.0 billion as of October 30, 2020, a decrease of 0.1% on a per-store basis.

Total additions to property and equipment in the 39-week period ended October 29, 2021 were $779 million, including approximately: $384 million for improvements, upgrades, remodels and relocations of existing stores; $184 million for store facilities, primarily for leasehold improvements as well as fixtures and equipment in new stores; $178 million for distribution and transportation related projects; and $33 million for information systems upgrades and technology-related projects. During the third quarter of 2021, the Company opened 268 new stores, remodeled 486 stores and relocated 24 stores.

Fiscal Year 2021 Financial Guidance and Store Growth Outlook

Significant uncertainty continues to exist regarding the recovery from the impact of the COVID-19 pandemic, including its impact on the U.S. economy, consumer behavior and the Company’s business, which makes it difficult for the Company to predict specific financial outcomes for the fiscal year ending January 28, 2022 (“fiscal year 2021”).

In addition, such outcomes could be impacted by several variables, which include, but are not limited to, economic recovery, employment levels, COVID-19 vaccine status, continued or additional disruptions to the supply chain, and the ongoing impact of the COVID-19 pandemic, including new variants of concern and any corresponding governmental measures such as closures of schools or businesses, as well as any potential impacts from the recently issued federal vaccination and testing mandate.

Despite this uncertainty, the company is updating its financial guidance issued on August 26, 2021 as a result of its strong results in the first three quarters of the year.

For fiscal year 2021, the company now expects the following:

-- Net sales growth of approximately 1.0% to 1.5%; compared to its previous expectation in the range of 0.5% to 1.5%.

-- Same-store sales decline of approximately 3.0% to 2.5%, which reflects growth of approximately 13% to 14% on a two-year stack basis4; compared to its previous expectation of a decline of 3.5% to 2.5%.

-- Diluted EPS in the range of $9.90 to $10.20, which reflects a compound annual growth rate in the range of 22% to 24% (or in the range of approximately 21% to 23% compared to 2019 Adjusted diluted EPS) over a two-year period5; compared to its previous expectation in the range of $9.60 to $10.20.

The company continues to expect capital expenditures, including those related to investments in the company’s strategic initiatives, in the range of $1.1 billion to $1.2 billion.

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