Dollar General Corp.’s stock rose 2.8% early Thursday, after the discount retailer beat third-quarter earnings estimates and backed its guidance for the full year, even as its recently reinstalled CEO said he was not happy with its performance.
The Goodlettsville, Tenn.-based company
DG,
posted net income of $276.2 million, or $1.26 a share, for the third quarter, down from $526.2 million, or $2.33 a share, in the year-earlier period. Sales rose 2.4% to $9.694 billion from $9.465 billion a year ago.
The FactSet consensus was for EPS of $1.20 and sales of $9.644 billion.
Same-store sales fell 1.3%, while FactSet was expecting a 2.1% decline.
“While we are not satisfied with our financial results for the third quarter, including a significant headwind from inventory shrink, we are pleased with the momentum in some of the underlying sales trends, including positive customer traffic, as well as market share gains in both dollars and units,” Chief Executive Todd Vasos said in a statement.
Vasos returned to the role of CEO in October, after serving in the position from June 2015 to November 2022.
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Inventory shrink refers to items lost through damage or shoplifting, and has become a common theme on retail earnings this year with some claiming organized gangs are targeting them and causing billions of dollars in losses.
Vasos said the company has completed a review of all aspects of the business and identified key areas for improvement both in the near and long term. For fiscal 2024, it is planning about 2,385 real-estate projects, including 800 new stores, 1,500 remodels and 85 relocations.
“This is a modest slow down compared to the number of projects in recent years, which we believe is prudent in this environment,” he said.
Sales in the quarter included declines in the home, seasonal, apparel and consumer categories. Gross profit as a percentage of net sales was 29% compared with 30.5% in the year-earlier period. The decline was mostly due to increased shrink, lower inventory markups and higher markdowns.
As of Nov. 3, total merchandise inventories, at cost, stood at $7.4 billion, up from $7.1 billion a year ago.
Dollar General backed its full-year guidance, for a sales increase of 1.5% to 2.5%, and for EPS of $7.10 to $7.60. The company expects same-store sales to be down 1% to flat.
The stock is down 45.6% in the year to date, while the S&P 500
SPX,
has gained 19%.
