Dollar General Conference Call Hghlights

Dollar General DG reported its Q3 earnings on Thursday. Shares of the company are up 1 percent. Below are some key highlights from its conference call. Performance Metrics: • For the third quarter, net sales grew 7.8% to $4.72 billion. • Comp store sales increased 2.8% as compared to the 2013 third quarter, with increases in both traffic and average ticket, extending that trend to 27 consecutive quarters. • Our comp sales trajectory improved as we moved through the quarter, and we have seen that trend accelerate into the fourth quarter. • We had a good back-to-school season along with strong sell-through for Halloween. • And importantly, we are seeing a significant step-up in comp sales as we start the fourth quarter. • Momentum has built as we lapped the SNAP benefit cuts in the fourth quarter of 2013, and we expect to achieve a comp sales growth of approximately 5% for the fourth quarter. • Perishables and tobacco continued to be the largest contributors to same-store sales growth. • Tobacco has continued to show very strong comp growth beyond its first full year anniversary. • Our non-consumables were positive for the quarter, marking the third consecutive quarter of improvement. • We are extremely pleased with sales growth in our home and apparel categories this year. • I believe our efforts on current trends and affordability in these areas have already begun to take hold with our customer. • Our gross profit rate of 30.1% of sales was 18 basis points less than last year's third quarter. • We continued to have a strong outlook for the fourth quarter. • On the comp sales front, our initiatives coupled with our commitment to everyday low price, continued to resonate with our customers. • We kicked off the holiday season with a three-day ad the week prior to Thanksgiving, and continued to emphasize our savings over an eight-day period centered on Thanksgiving Day. • We offered exclusive holiday savings across gifts, toys, electronics, clothing, dcor, baking, and additional categories for every holiday need. • We are pleased with our customers' response to these promotional events. Financial Metrics: • Gross profit increased by 7.2% as a percentage of sales, and decreased by 18 basis points to 30.1% in the 2014 third quarter compared to the 2013 third quarter. • Year-to-date, we generated cash from operations of $841 million. • That's up $80 million from last year's 39-week period. • Total capital expenditures were $289 million, including $104 million for improvements, upgrades, remodels and relocations of existing source. • Turning now to guidance, top-line sales for the full year 2014 are expected to increase approximately 8% at the low-end of our previous guidance range. • Same-store sales are now expected to increase at or slightly below the low-end of our previous range of 3.0% to 3.5%. • Same-store sales growth of approximately 5% forecast for the fourth quarter. • We expect adjusted diluted earnings per share for the year to be in the middle of our previous full year adjusted earnings per share range of $3.45 to $3.55. • This excludes any cost related to the potential FDO transaction. • In addition, it assumes no additional share repurchases in the fourth quarter. • It does assume the reinstatement of the Work Opportunity Tax Credit back to the beginning of the year, which has always been included in our guidance for our effective tax rate for the year. • The impact of the tax credit is approximately $0.04 per share. • For the year, we're on track to open approximately 700 new stores and capital expenditures are expected to be approximately $400 million. • I believe that we underestimated the impact of these cumulative headwinds on our customer. • As a result, there is no doubt that affordability is and will continue to be a focus of our core customer. • Our renewed focus on $1 to $5 items continues to gain traction. • We had more than 75% of our SKUs or 78% of our sales for the third quarter that were items priced at $5 or less. • This is important, as we know we trade more customers with the $1 fixed price retail concept than any other small-box retailer.