Dollar General Corporation (DG - Free Report) delivered positive earnings surprise for the third consecutive quarter, when the company posted second-quarter fiscal 2017 results. The company reported earnings of $1.08 per share. However, on an adjusted basis earnings per share came in at $1.10, beating the Zacks Consensus Estimate by a penny and also increased 2% year over year.
Net sales came in at $5,828.3 million, an increase of 8.1% from the prior-year quarter. Moreover, net sales came ahead the Zacks Consensus Estimate of $5,816 million, marking the third consecutive quarter of beat. Increase in sales was driven by robust performance of consumables and seasonal categories.
The company’s comparable-store sales increased 2.6% year over year primarily owing to rise in average transaction amount as well traffic. Consumables and seasonal categories provided a boost to the comparable-store sales while the home products and apparel categories had a negative impact.
Sales in the Consumables category increased 8.9% to $4,484.4 million, while the Seasonal category witnessed a rise of 6.5% in sales to $718 million. Home products sales increased 3.8% to $327.6 million and Apparel category sales grew 4.3% to $298.3 million.
Gross profit advanced 6.5% to $1,790.5 million, while gross margin contracted 47 basis points (bps) to 30.7% owing to increased markdowns and promotional activities along with a higher percentage of sales of consumables which generally have lesser gross profit in comparison with non-consumables.
Operating profit declined 3.1% to $493.1 million, while operating margin decreased more than 90 bps to 8.5%.
Following the results, the company’s shares are down roughly 5% during pre-market trading session. However, the company’s shares have increased 4.6% in the past six months, outperforming the industry’s decline of 7.9%.
Other Financial Details
Dollar General ended the quarter with cash and cash equivalents of $214.2 million, long-term obligations of $2,683.1 million and shareholders’ equity of $5,687.1 million. In the first six months of fiscal 2017, the company incurred capital expenditures of $314 million. The company continues to anticipate capital expenditure for fiscal 2017 to be in the range of $715-$765 million.
The company bought back one million shares in the second quarter. Since the commencement of the share repurchase program in December 2011, the company has bought back 76.7 million shares aggregating $4.7 billion. At the end of the second quarter, the company has an outstanding authorization of nearly $770 million. Further, management announced a quarterly dividend of 26 cents per share that will be payable on Oct 24, 2017 to shareholders of record as on Oct 10. Further in fiscal 2017, the company continues to expect share repurchase of nearly $450 million.
The company stated that in Jun 12, 2017, it completed the buyout of 285 Acquired Stores. The new store sites are expected to be converted in to Dollar General’s banner by November 2017 end.
Including the impact from the aforementioned buyout, management now anticipates net sales to rise in the band of 5-7%. However, the company expects GAAP earnings in the band of $4.35-$4.50 per share, up from the previous guided range of $4.25-$4.50. Same-store sales growth is still anticipated in the band of marginally positive to 2% for fiscal 2017.
Moreover, the company intends to introduce roughly 1,285 new outlets, relocate or remodel 760 stores. As of Aug 4, 2017, Dollar General operated 13,865 stores across 43 states.
Zacks Rank & Other Stocks to Consider
Dollar General’s currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks which warrant a look in the retail sector includes The Children's Place, Inc. (PLCE - Free Report) , Burlington Stores, Inc. (BURL - Free Report) and Big Lots, Inc. (BIG - Free Report) . All these stocks carry the same Zacks Rank as Dollar General. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Children's Place delivered an average positive earnings surprise of 16.3% in the trailing four quarters and has a long-term earnings growth rate of 9%.
Burlington Stores delivered an average positive earnings surprise of 22.6% in the trailing four quarters and has a long-term earnings growth rate of 15.9%.
Big Lots delivered an average positive earnings surprise of 81.1% in the trailing four quarters and has a long-term earnings growth rate of 13.5%.
One Simple Trading Idea
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.
Learn more >>
(We are reissuing this article to correct a mistake. The original article, issued earlier today, should no longer be relied upon.)