Thursday, discount retailer Dollar General Corp. (DG), first time after it was taken public, announced a profit for the third quarter, compared to a loss last year. The prior year quarter was weighed down by litigation settlement expenses, one time hurricane-related losses and fixed asset impairment charges. Sales were up 12.7%, while same store sales grew 9.2%. Looking ahead, the company expressed caution regarding the holiday season due to challenging economic environment.
The Goodlettsville, Tennessee-based company which started trading in mid November, reported a net profit of $75.6 million or $0.24 per share, compared to a loss of $7.3 million or $0.02 per share in the year-ago quarter. Excluding the impact of a $37.4 million, after tax, shareholder litigation settlement and related expenses, profit increased 151% in comparison with 2008 third quarter net income of $30.1 million, or $0.09 per share,
Sales for the quarter increased 12.7% to $2.93 billion from $2.60 billion in the prior-year quarter. Same-store sales grew 9.2% with customer traffic and average transaction amount contributing to the sales increase.
For the sequentially preceding quarter, the company reported net income of $93.59 million, higher than $27.72 million reported last year. Sales for the second quarter rose to $2.90 billion from $2.61 billion in the year-ago period.
Among the competitors, retail giant Wal-Mart Stores, Inc. (WMT) reported higher profit for the third quarter, helped by productivity initiatives and efficient inventory management at the U.S. segment. However, the company's same store sales for the third quarter reported a decline.
Another peer, Chesapeake, Virginia-based retailer Dollar Tree Inc. (DLTR) reported higher net profit for the third-quarter, with a 12.1% increase in top line. Per share earnings rose 61.7% over last year.
Founded in 1939, Dollar General operates more than 8,700 neighborhood stores in 35 states, with its around 72 thousand employees. The company's stores serve households in rural and small markets, as well as the higher income customer base. In August, Dollar General filed for its intention to go public, and successfully completed an IPO of 34.10 million shares for gross proceeds of $716.1 million.
Dollar General's common stock was publicly traded from 1968 until July 2007, when it merged with an entity controlled by investment funds affiliated with Kohlberg Kravis Roberts & Co., L.P., or KKR. Dollar General is now a subsidiary of Buck Holdings, L.P., a Delaware limited partnership controlled by KKR.
Segment wise, Dollar General's third quarter consumables sales grew 14.7% to $2.14 billion from last year, while seasonal sales increased 15.4% to $370.03million year-over-year. Apparel sales improved 2.9% to $213.42 million, while Home product sales edged up 0.5% to $207.80 million from last year.
For the quarter, gross profit was 30.8%, up 112 basis points from the prior year quarter, primarily due to the impact of a $1.0 million LIFO credit in the 2009 third quarter compared to a $15.7 million LIFO provision in the 2008 third quarter.
Selling, general and administrative expenses increased 8.3% to $686.84 million from $634.06 million in the 2008 third quarter. However, these expenses, as a percentage of sales decreased year-over-year, primarily attributable to leverage attained from significantly higher net sales.
For the nine-month period, the company reported net income of $252.2 million or $0.79 per share, compared to $26.3 million or $0.08 per share in the comparable 2008 period.
Total sales for the 39-week period were $8.61 billion, up 13.1% from $7.61 billion in the comparable 2008 period. Same-store sales increased 10.3% with customer traffic and average transaction amount contributing to the sales increase.
Looking ahead the company expressed caution regarding its holiday sales season, despite a significant Thanksgiving weekend sales, citing challenging economic environment for average consumer due to higher unemployment.
Further, the company said that it expects to pay down debt of about $300 million in January 2010 with a portion of its expected excess cash. Dollar General also expects to end the 2009 fiscal year with around 500 new stores and a combined 450 remodels and relocations.
The company currently expects total capital expenditures for the 2009 fiscal year in a range of $275 to $300 million. In 2010, the Company plans to open about 600 new stores and to remodel or relocate a total of around 500 stores.
DG is currently trading at $23.84, down $0.16 or 0.67% on a volume of 560,328 shares.
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