Dollar General (DG) Sees 4.5% Q4 Net Sales Growth, Beating Expectations

Dollar General Corporation (NYSE: DG) has released its financial results for the fourth quarter and the fiscal year ending January 31, 2025. The company reported a net sales increase of 4.5% for the fourth quarter, reaching $10.3 billion, while the fiscal year net sales rose by 5.0% to $40.6 billion. However, the fourth quarter operating profit saw a significant decline of 49.2%, dropping to $294.2 million, and the diluted earnings per share (EPS) decreased by 52.5% to $0.87.

These figures were affected by charges of $232 million associated with a store portfolio review, which primarily involved store closures and pOpshelf impairment charges. Despite these challenges, the annual cash flows from operations increased by 25.3% to $3.0 billion.

The company’s same-store sales for the fourth quarter increased by 1.2%, reflecting a 2.3% rise in average transaction amount, although customer traffic decreased by 1.1%. The consumables category showed growth, offsetting declines in seasonal, home products, and apparel categories. Gross profit as a percentage of net sales slightly decreased to 29.4%, influenced by increased markdowns, inventory damages, and distribution costs. Selling, General and Administrative Expenses (SG&A) rose to 26.5% of net sales, driven by impairment charges and higher retail labor costs.

Dollar General Reports Double Beat in Q4

Comparing the company’s performance against expectations reveals a shortfall in several areas. The adjusted EPS for the fourth quarter beat the anticipated $1.5, coming in at $1.68. Similarly, the revenue of $10.3 billion slightly surpassed the expected $10.26 billion, but the overall performance was marred by the substantial decrease in operating profit and net income. The company’s fiscal year diluted EPS decreased by 32.3% to $5.11, falling short of market expectations.

The company’s fiscal 2024 performance was affected by a store portfolio optimization review, which led to the closure of 96 Dollar General stores and 45 pOpshelf stores. This strategic move resulted in a negative impact on EPS of approximately $0.81 in the fourth quarter. The company’s efforts to streamline operations and focus on core strengths were evident in the Back to Basics initiative, which aimed to enhance customer satisfaction and market share.

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Dollar General Expects Net Sales Growth of 3.4% to 4.4% for Fiscal 2025

Dollar General has provided financial guidance for fiscal 2025, with plans to execute approximately 4,885 real estate projects, including opening 575 new stores in the U.S. and 15 new stores in Mexico. The company also intends to remodel around 2,000 stores and relocate 45 stores. The financial guidance assumes no share repurchases in fiscal 2025, reflecting a cautious approach to capital allocation.

The long-term financial framework targets net sales growth in the range of 3.4% to 4.4% and same-store sales growth of 1.2% to 2.2%. The company aims for diluted EPS in the range of $5.10 to $5.80, with an effective tax rate of approximately 23.5%. Capital expenditures are expected to be between $1.3 billion and $1.4 billion, focusing on strategic initiatives to drive sustainable growth and shareholder value.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.