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Dollar General Boosts Full Year Earnings View After Q3 Profit Tops View


Discount retailer Dollar General Corp. (DG) Tuesday reported higher profit for the third quarter that topped estimates, as sales improved amid increased demand for candy and snacks as well as perishables offerings. The company raised the lower end of its full year earnings forecast while lowering the upper end of its sales target, citing a challenging competitive environment.

Net income for the quarter increased to $207.69 million or $0.62 per share from $171.16 million or $0.50 per share in the prior year.

Adjusted net income was $209.5 million or $0.63 per share in the just concluded quarter. On average, 24 analysts polled by Thomson Reuters expected earnings of $0.60 per share for the quarter. Analysts' estimates typically exclude special items.

Sales increased 10.3 percent to $3.96 billion from $3.6 billion. Analysts expected revenues of $3.96 billion.

Same-store sales increased 4.0 percent, on top of a 6.3 percent improvement last year, helped by increases in customer traffic and average transaction amount.

Sales of Consumables continued to increase at a higher rate than non-consumables with the most significant growth in candy and snacks and perishables offerings.

Sales growth in home and seasonal categories, as well as certain basic apparel departments, was strong. Overall, hanging apparel sales were weak in the quarter.

Gross margin was 30.9 percent compared to 31 percent last year, amid higher markdowns, lesser impact from price increases, heavier consumables weighting within the sales mix and a higher shrink rate.

Dollar General expects comparable store sales to increase 3 to 4 percent in the fourth quarter.

The company now expects adjusted full year earnings of $2.82 to $2.85 per share, up from the previous projection of $2.77 to $2.85 per share.

Total sales for the year is estimated to increase 8 to 8.5 percent over the 53-week 2011 fiscal year, or 10 to 10.5 percent on a comparable 52-week basis. Same-store sales, based on a comparable 52-week period, are now expected to increase 4.5 to 5.0 percent.

The previous forecast was for total sales to increase 8 to 9 percent over the 53-week 2011 fiscal year, or 10 to 11 percent on a comparable 52-week basis. Same-store sales, based on a comparable 52-week period, were earlier estimated to increase 4 to 5 percent.

Wall Street expects full year earnings of $2.86 per share on revenues of $16.12 billion.

Rick Dreiling, CEO, said, "Although our performance over the Thanksgiving weekend and start of the holiday season has been encouraging, we continue to be cautious for the remainder of the year.''

''We are facing a significant same-store sales comparison from our 2011 fourth quarter, which included very strong January sales, growing near-term pressures that are impacting our customers' confidence and spending, and a challenging competitive environment,'' Dreiling added.

In fiscal 2013, the company plans to open 635 new stores, including 20 Dollar General Market stores and 40 Dollar General Plus stores. The retailer also plans to remodel or relocate 550 stores. Square footage is again expected to increase around 7 percent.

The stock closed on Monday at $46.57.

by RTTNews Staff Writer

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