Market Overview

Dollar General Earnings Conference Call Summary

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Dollar General (NYSE: DG) on Tuesday hosted its earnings call for the second-quarter of the fiscal year.

Despite reporting poor sales for the quarter, management spoke in a pleased and optimistic tone about the company's performance, competitors and future operations.

Second-Quarter Performance

  • Just like it was for many retailers, as the weather normalized sales trends improved. The company saw a turn in business, while taking Easter into account. That momentum has continued quarter-to-date.
  • In the second-quarter, management saw strength across both consumables and non-consumable categories.
  • Both customer traffic and average ticket increased for the 25th consecutive quarter.
  • Gross margin, as a percentage of sales, declined 57 basis points. This was primarily due to the increase in the sales of lower margin consumables, including tobacco and perishables, as a percentage of overall sales.

Competitors

  • CEO Richard W. Dreiling appeared not too concerned about Wal-Mart Stores' recent expansion plan to deploy its small-format stores, saying competitors in the past have done similar moves, but yet Dollar General has come ahead.
  • With CVS Caremark recent discontinuation of the sale of cigarettes, Dollar General saw CVS customers coming to Dollar General for cigarette and tobacco purchases. This was reflected in Dollar General's comp sales, as well as tobacco and cigarette sales for the quarter.
  • With Family Dollar closing more stores, management spoke about eyeing the property and potentially acquiring the spaces.

Future Operations

  • Plans on rolling out an integrated coupon software that will allow consumers to use coupons without needing the paper, simply by entering a personalized code.
  • Plans to open 700 new stores next year.
  • Management didn't provide any quarterly guidance, but stressed the philosophy of wanting shareholders to see value of Dollar General through the quality of Dollar General.
  • Management set a target to buyback $1.1 billion in shares.

Posted-In: cvs caremarkEarnings News Guidance Financing Retail Sales Buybacks Management

 

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