Dollar General Earnings Grow, Forecast Raised

Dollar General (DG) reported its fiscal 2010 second-quarter net income rose by 51% compared to the year-ago period, as sales climbed 10% and the company worked on further cost reduction and improved inventory control.

For the quarter ending July 30, 2010, the thrift retailer reported net income grew to $141.2 million, or 41 cents per share, up from $93 million, or 29 cents per share in the same quarter a year ago. Excluding items, Dollar General reported earnings of 42 cents per share, topping analyst estimates of 38 cents per share.

Sales grew 10% to $3.2 billion from $2.9 billion. Same-store sales increased 5.1% in the 2010 quarter and 8.6% in the 2009 quarter, with customer traffic and average transaction amounts contributing to growth in both periods. Gross margin improved to 32.2% from 31.2% last year.

"Our outstanding results for the second quarter build on our track record of success over the last ten quarters," said Chairmand and CEO Rick Dreiling. "During the second quarter, we saw same-store sales accelerate in the last month, and I am encouraged with sales so far in the third quarter."

"Fiscal 2010 is on track to be another great year for Dollar General, reflecting our disciplined execution and ability to deliver excellent performance and positioning us for continued growth in the future," said Dreiling.

The company added in its statement on outlook that "The state of the macroeconomic environment, including sustained rates of high unemployment, continues to pressure the consumer in general. Dollar General is closely monitoring how consumers respond to both the economic and the competitive climate."

The dollar store operator has increased its expectations for fiscal 2010 earnings per share to a range of $1.68 to $1.74. Previous guidance was for adjusted earnings of $1.62 to $1.69 per diluted share. The company now expects total sales for the 2010 fiscal year to increase 8.5% to 10.5%, including an increase in same-store sales of 4% to 6%.

Dollar General said it plans to open approximately 600 new stores and to remodel or relocate a total of approximately 500 stores in 2010. Capital expenditures for the fiscal year are currently expected to be approximately $350 million.