GOODLETTSVILLE - Dollar General Corporation (NYSE:DG) announced a 2.4% increase in third-quarter revenue to $9.69 billion, despite a 1.3% decline in same-store sales and a drop in gross profits to 29% of sales, affected by inventory shrinkage and seasonal category declines. The company's operating profits shrank to $433 million, but earnings per share (EPS) reached $1.26, surpassing the expected $1.21. CEO Todd Vasos acknowledged the quarter's challenges while highlighting positive sales trends.
The retailer's financial performance was bolstered by higher foot traffic, even as the average transaction value fell. Dollar General's share repurchase program is currently paused, with $1.4 billion remaining for future buybacks. The company has provided an annual revenue forecast ranging from $38.4 billion to $38.8 billion for fiscal year 2023, with an anticipated EPS between $7.10 and $7.60.
Looking ahead to fiscal year 2024, Dollar General plans to expand its footprint by opening approximately 800 new stores, including locations in Mexico, and nearly 30 pOpshelf store openings. The expansion strategy also involves relocating roughly 85 stores, driven by lower Last In First Out (LIFO) provisions and reduced transportation costs.
Additionally, the company anticipates modest net sales growth of 1.5% to 2.5% for FY2023 with same-store sales potentially decreasing by up to -1%. Remodeling efforts are set to update around 1,500 existing locations in the coming year.
Shareholders can expect a quarterly dividend of $0.59 per share with the record date set for January 9, 2024, and payment due on January 23, 2024.
While Dollar General has outlined ambitious plans for growth and restructuring, analysts maintain a Hold consensus on the stock, citing possible downside risks amid current market conditions.
InvestingPro Insights
Dollar General's recent earnings report has highlighted both the resilience and the challenges faced by the retailer in a fluctuating market. With a focus on growth and investor returns, the company has been navigating through inventory shrinkage and seasonal category declines. An InvestingPro Tip highlights that Dollar General has raised its dividend for five consecutive years, showcasing a commitment to shareholder returns despite market headwinds. Moreover, the company's management has been actively buying back shares, a move that can signal confidence in the company's future and help support the stock price.
From a financial metrics standpoint, Dollar General boasts a market capitalization of $29.07 billion and trades at an attractive P/E ratio of 13.62, as per the latest InvestingPro Data. This could indicate a potentially undervalued stock in the Consumer Staples Distribution & Retail industry, especially when considering the company's high return on invested capital. Additionally, Dollar General's liquid assets exceed its short-term obligations, which is a reassuring sign of the company's liquidity and ability to manage short-term debts.
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