Market Overview

Dollar General Corporation Reports 3.8% Same-Store Sales Growth for First Quarter 2019

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Company Continues to Execute Real Estate Strategy; Opens 240 New
Stores and Remodels 330 Stores

Company Reiterates Financial Guidance for Fiscal Year 2019

Dollar General Corporation (NYSE:DG) today reported financial results
for its fiscal year 2019 first quarter (13 weeks) ended May 3, 2019.

  • Net Sales Increased 8.3%; Same-Store Sales Increased 3.8%
  • Operating Profit Increased 4.5% to $512.2 million
  • Diluted Earnings Per Share ("EPS") of $1.48
  • Cash Flows From Operations Increased 4.7% to $574 million
  • $283 Million Returned to Shareholders through Share Repurchases and
    Cash Dividends
  • Board of Directors Declares Second Quarter 2019 Cash Dividend of $0.32
    per share

"Our team continued to make great progress on our strategic initiatives
this quarter, while remaining focused on our four operating priorities,"
said Todd Vasos, Dollar General's chief executive officer. "This hard
work and focus led to strong top- and bottom-line growth, and I'm very
proud of our achievements. Looking forward, we have a wide variety of
initiatives and projects that we believe can help extend our growth
trajectory over both the near and longer term. During 2019, we will
enter our 80th year of serving others, and we remain
dedicated to bringing innovation to our retail channel and delivering on
our commitment of value and convenience to our customers. We are excited
about our future and believe we are creating long-term value for our
shareholders."

First Quarter 2019 Highlights

Net sales increased 8.3% to $6.6 billion in the first quarter of 2019
compared to $6.1 billion in the first quarter of 2018. This net sales
increase included positive sales contributions from new stores and
growth in same-store sales, modestly offset by the impact of store
closures. Same-store sales increased 3.8% compared with the first
quarter of 2018, due to increases in both average transaction amount and
customer traffic. Same-store sales in the first quarter of 2019 included
growth in the consumables, seasonal, and home categories, partially
offset by declines in the apparel category.

Gross profit as a percentage of net sales was 30.2% in the first quarter
of 2019 compared to 30.5% in the first quarter of 2018, a decrease of 23
basis points. This gross profit rate decrease was primarily attributable
to increases in distribution and transportation costs, a greater
proportion of sales coming from consumables that generally have a lower
gross profit rate than other product categories, and sales of lower
margin products comprising a higher proportion of consumables sales.
These factors were partially offset by higher initial markups on
inventory purchases.

Selling, general and administrative expenses ("SG&A") as a percentage of
net sales were 22.5% in the first quarter of 2019 compared to 22.4% in
the first quarter of 2018, an increase of six basis points. This SG&A
increase was primarily attributable to increased employee benefits and
occupancy costs as a percentage of sales, partially offset by lower
repairs and maintenance and workers' compensation expenses.

Operating profit for the first quarter of 2019 grew 4.5% to $512.2
million compared with $490.2 million in the first quarter of 2018.

The effective income tax rate in the first quarter of 2019 was 20.8%
compared to 21.6% in the first quarter of 2018. This lower effective
income tax rate was primarily due to the recognition of a larger tax
benefit in the 2019 period associated with stock based compensation than
in the 2018 period.

The Company reported net income of $385 million for the first quarter of
2019 compared to $365 million in the first quarter of 2018. Diluted EPS
increased 8.8% to $1.48 for the first quarter of 2019 compared to
diluted EPS of $1.36 in the first quarter of 2018.

Merchandise Inventories

As of May 3, 2019, total merchandise inventories, at cost, were $4.11
billion compared to $3.59 billion as of May 4, 2018, an increase of
approximately 8.2% on a per-store basis. Inventory growth in the first
quarter of 2019 was largely driven by a change in the Company's
replenishment process, which is focused on enhancing on-shelf
availability.

Capital Expenditures

Total additions to property and equipment in the first quarter of 2019
were $145 million, including approximately: $67 million for
improvements, upgrades, remodels and relocations of existing stores; $36
million for new leased stores, primarily for leasehold improvements,
fixtures and equipment; $25 million for distribution and transportation
related projects; and $15 million for information systems upgrades and
technology-related projects. During the first quarter of 2019, the
Company opened 240 new stores, remodeled 330 stores and relocated 27
stores.

Share Repurchases

The Company repurchased approximately $200 million of its common stock,
or 1.7 million shares, under its share repurchase program in the first
quarter of 2019, at an average price of $118.60 per share. The total
remaining authorization for future repurchases was approximately $1.1
billion at the end of the first quarter of 2019. Under the
authorization, purchases may be made in the open market or in privately
negotiated transactions from time to time subject to market and other
conditions. The authorization has no expiration date.

Dividend

On May 29, 2019, the Company's Board of Directors declared a quarterly
cash dividend of $0.32 per share on the Company's common stock, payable
on or before July 23, 2019 to shareholders of record on July 9, 2019.
While the Board of Directors intends to continue regular cash dividends,
the declaration and amount of future dividends are subject to the sole
discretion of the Board and will depend upon, among other things, the
Company's results of operations, cash requirements, financial condition,
contractual restrictions, and other factors the Board may deem relevant
in its sole discretion.

Reiterating Fiscal Year 2019 Financial Guidance
and Store Growth Outlook

For the 52-week fiscal year ending January 31, 2020 ("fiscal year
2019"), the Company is reiterating its financial guidance and store
growth outlook issued on March 14, 2019. The financial guidance includes
the anticipated impact of increased tariff rates on certain products
imported from China, which became effective on May 10, 2019. The
guidance also assumes that the Company can successfully mitigate,
absorb, or otherwise offset the impact of these increased tariff rates.
The guidance does not contemplate any additional increases in tariff
rates or any expansion of additional products subject to tariffs.

For fiscal year 2019, the Company continues to expect the following:

  • Net sales growth of approximately 7%
  • Same-store sales growth of approximately 2.5%
  • Operating profit growth of approximately 4% to 6%
  • Diluted EPS in the range of $6.30 to $6.50; assumes an effective tax
    rate range of 22.0% to 22.5%
  • Share repurchases of approximately $1.0 billion
  • Capital expenditures in the range of $775 million to $825 million,
    including those related to investments in the Company's strategic
    initiatives

During fiscal year 2019, the Company plans to execute approximately
2,075 real estate projects, including 975 new store openings, 1,000
mature store remodels, and 100 store relocations.

Conference Call Information

The Company will hold a conference call on Thursday, May 30, 2019 at
9:00 a.m. CT/10:00 a.m. ET, hosted by Todd Vasos, chief executive
officer, and John Garratt, chief financial officer. To participate via
telephone, please call (877) 868-1301 at least 10 minutes before the
conference call is scheduled to begin. The conference ID is 2766668.
There will also be a live webcast of the call available at
https://investor.dollargeneral.com under "News & Events, Events &
Presentations." A replay of the conference call will be available
through Wednesday, June 12, 2019, and will be accessible online or by
calling (855) 859-2056. The conference ID for the replay is 2766668.

Forward-Looking Statements

This press release contains forward-looking information within the
meaning of the federal securities laws, including the Private Securities
Litigation Reform Act. Forward-looking statements include those
regarding the Company's outlook, plans and intentions including, but not
limited to, statements made within the quotation of Mr. Vasos and in the
sections entitled "Reiterating Fiscal Year 2019 Financial Guidance and
Store Growth Outlook," "Share Repurchases," and "Dividend". A reader can
identify forward-looking statements because they are not limited to
historical fact or they use words such as "outlook," "may," "will,"
"should," "could," "would," "can," "believe," "anticipate," "plan,"
"expect," "estimate," "assume," "forecast," "confident,"
"opportunities," "goal," "prospect," "positioned," "intend,"
"committed," "continue," "future," "long-term," "guidance," "years
ahead," "looking ahead," "looking forward," "going forward," "focused
on," "subject to," or "will likely result," and similar expressions that
concern the Company's strategy, plans, intentions or beliefs about
future occurrences or results. These matters involve risks,
uncertainties and other factors that may cause the actual performance of
the Company to differ materially from that which the Company expected.
Many of these statements are derived from the Company's operating
budgets and forecasts as of the date of this release, which are based on
many detailed assumptions that the Company believes are reasonable.
However, it is very difficult to predict the effect of known factors on
the Company's future results, and the Company cannot anticipate all
factors that could affect future results that may be important to an
investor. All forward-looking information should be evaluated in the
context of these risks, uncertainties and other factors. Important
factors that could cause actual results to differ materially from the
expectations expressed in or implied by such forward-looking statements
include, but are not limited to:

  • economic factors, including but not limited to employment levels;
    inflation; higher fuel, energy, health care and housing costs,
    interest rates, consumer debt levels, and tax rates; tax law changes
    that negatively affect credits and refunds; lack of available credit;
    decreases in, or elimination of, government subsidies such as
    unemployment and food assistance programs; commodity rates;
    transportation, lease and insurance costs; wage rates; foreign
    exchange rate fluctuations; measures that create barriers to or
    increase the costs of international trade (including increased import
    duties or tariffs); and changes in laws and regulations, and their
    effect on, as applicable, customer spending and disposable income, the
    Company's ability to execute its strategies and initiatives, the
    Company's cost of goods sold, and the Company's SG&A expenses
    (including real estate costs);
  • failure to achieve or sustain the Company's strategies and
    initiatives, including those relating to merchandising, real estate
    and new store development, store formats, digital, shrink, sourcing,
    private brand, inventory management, supply chain, store operations,
    expense reduction, and technology;
  • failure to timely and cost-effectively execute the Company's real
    estate projects or to anticipate or successfully address the
    challenges imposed by the Company's expansion, including into new
    states or metro areas;
  • competitive pressures and changes in the competitive environment and
    the geographic and product markets where the Company operates,
    including, but not limited to, pricing, expanded availability of
    mobile, web-based and other digital technologies, and consolidation;
  • levels of inventory shrinkage;
  • failure to successfully manage inventory balances;
  • failure to maintain the security of information that the Company holds
    relating to proprietary business information or the Company's
    customers, employees and vendors;
  • a significant disruption to the Company's distribution network, to the
    capacity of the Company's distribution centers or to the timely
    receipt of inventory, or delays in constructing or opening new
    distribution centers;
  • risks and challenges associated with sourcing merchandise from
    suppliers, including, but not limited to, those related to
    international trade;
  • product liability, product recall or other product safety or labeling
    claims;
  • the impact of changes in or noncompliance with governmental
    regulations and requirements (including, but not limited to, those
    relating to environmental compliance, product and food safety,
    labeling and sales, information security and privacy, labor and
    employment, employee wages, and consumer protection, as well as tax
    laws, the interpretation of existing tax laws, or the Company's
    failure to sustain its reporting positions negatively affecting the
    Company's tax rate) and developments in or outcomes of private
    actions, class actions, multi-district litigation, administrative
    proceedings, regulatory actions or other litigation;
  • incurrence of material uninsured losses, excessive insurance costs or
    accident costs;
  • natural disasters, unusual weather conditions (whether or not caused
    by climate change), pandemic outbreaks, terrorist acts and global
    political events;
  • damage or interruption to the Company's information systems as a
    result of external factors, staffing shortages or challenges in
    maintaining or updating the Company's existing technology or
    developing or implementing new technology;
  • failure to attract, train and retain qualified employees while
    controlling labor costs and other labor issues;
  • loss of key personnel or inability to hire additional qualified
    personnel;
  • risks associated with the Company's private brands, including, but not
    limited to, the Company's level of success in improving their gross
    profit rate;
  • seasonality of the Company's business;
  • deterioration in market conditions, including market disruptions,
    limited liquidity and interest rate fluctuations, or changes in the
    Company's credit profile;
  • new accounting guidance or changes in the interpretation or
    application of existing guidance, such as changes to guidance related
    to leases;
  • the factors disclosed under "Risk Factors" in the Company's most
    recent Annual Report on Form 10-K; and
  • such other factors as may be discussed or identified in this press
    release.

All forward-looking statements are qualified in their entirety by these
and other cautionary statements that the Company makes from time to time
in its SEC filings and public communications. The Company cannot assure
the reader that it will realize the results or developments the Company
anticipates or, even if substantially realized, that they will result in
the consequences or affect the Company or its operations in the way the
Company expects. Forward-looking statements speak only as of the date
made. The Company undertakes no obligation, and specifically disclaims
any duty, to update or revise any forward-looking statements to reflect
events or circumstances arising after the date on which they were made,
except as otherwise required by law. As a result of these risks and
uncertainties, readers are cautioned not to place undue reliance on any
forward-looking statements included herein or that may be made elsewhere
from time to time by, or on behalf of, the Company.

About Dollar General Corporation

Dollar General Corporation has been delivering value to shoppers for 80
years. Dollar General helps shoppers Save time. Save money. Every day!®
by offering products that are frequently used and replenished, such as
food, snacks, health and beauty aids, cleaning supplies, basic apparel,
housewares and seasonal items at everyday low prices in convenient
neighborhood locations. Dollar General operated 15,597 stores in 44
states as of May 3, 2019. In addition to high-quality private brands,
Dollar General sells products from America's most-trusted manufacturers
such as Clorox, Energizer, Procter & Gamble, Hanes, Coca-Cola, Mars,
Unilever, Nestle, Kimberly-Clark, Kellogg's, General Mills, and PepsiCo.
Learn more about Dollar General at www.dollargeneral.com.

 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
   
(Unaudited)
May 3   May 4 February 1
2019   2018   2019
ASSETS
Current assets:
Cash and cash equivalents $ 271,111 $ 283,970 $ 235,487
Merchandise inventories 4,109,759 3,594,529 4,097,004
Income taxes receivable 25,164 28,637 57,804
Prepaid expenses and other current assets     177,735       258,900       272,725  
Total current assets     4,583,769       4,166,036       4,663,020  
Net property and equipment     3,008,425       2,758,369       2,970,806  
Operating lease assets     8,140,326       -       -  
Goodwill     4,338,589       4,338,589       4,338,589  
Other intangible assets, net     1,200,164       1,200,375       1,200,217  
Other assets, net     33,011       29,861       31,406  
Total assets   $ 21,304,284     $ 12,493,230     $ 13,204,038  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 555 $ 1,889 $ 1,950
Current portion of operating lease liabilities 894,469 - -
Accounts payable 2,452,898 2,018,320 2,385,469
Accrued expenses and other 560,007 495,371 618,405
Income taxes payable     48,787       9,752       10,033  
Total current liabilities     3,956,716       2,525,332       3,015,857  
Long-term obligations     2,732,105       2,862,497       2,862,740  
Long-term operating lease liabilities     7,238,945       -       -  
Deferred income taxes     629,864       565,150       609,687  
Other liabilities     173,985       303,933       298,361  
Total liabilities     14,731,615       6,256,912       6,786,645  
 
Commitments and contingencies
 
Shareholders' equity:
Preferred stock - - -
Common stock 226,032 234,109 227,072
Additional paid-in capital 3,275,917 3,210,527 3,252,421
Retained earnings 3,074,584 2,795,620 2,941,107
Accumulated other comprehensive loss     (3,864 )     (3,938 )     (3,207 )
Total shareholders' equity     6,572,669       6,236,318       6,417,393  
Total liabilities and shareholders' equity   $ 21,304,284     $ 12,493,230     $ 13,204,038  
 

     
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
 
For the Quarter Ended
May 3 % of Net May 4 % of Net
2019   Sales   2018   Sales
Net sales $ 6,623,185 100.00 % $ 6,114,463 100.00 %
Cost of goods sold     4,620,909   69.77       4,252,214   69.54  
Gross profit 2,002,276 30.23 1,862,249 30.46
Selling, general and administrative expenses     1,490,039   22.50       1,372,065   22.44  
Operating profit 512,237 7.73 490,184 8.02
Interest expense     25,933   0.39       24,773   0.41  
Income before income taxes 486,304 7.34 465,411 7.61
Income tax expense     101,291   1.53       100,559   1.64  
Net income   $ 385,013   5.81 %   $ 364,852   5.97 %
 
Earnings per share:
Basic $ 1.49 $ 1.36
Diluted $ 1.48 $ 1.36
Weighted average shares outstanding:
Basic 259,021 268,267
Diluted 260,265 269,135
 

 
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
   
For the 13 Weeks Ended
May 3 May 4
2019   2018
Cash flows from operating activities:
Net income $ 385,013 $ 364,852

Adjustments to reconcile net income to net cash from operating
activities:

Depreciation and amortization 122,485 109,335
Deferred income taxes 10,303 8,046
Noncash share-based compensation 13,631 12,406
Other noncash (gains) and losses 3,527 3,340
Change in operating assets and liabilities:
Merchandise inventories (14,252 ) 12,356
Prepaid expenses and other current assets (7,392 ) 3,294
Accounts payable 39,707 5,043
Accrued expenses and other liabilities (47,679 ) (55,124 )
Income taxes 71,394 85,276
Other     (2,542 )     (176 )
Net cash provided by (used in) operating activities     574,195       548,648  
 
Cash flows from investing activities:
Purchases of property and equipment (144,757 ) (164,630 )
Proceeds from sales of property and equipment     453       631  
Net cash provided by (used in) investing activities     (144,304 )     (163,999 )
 
Cash flows from financing activities:
Issuance of long-term obligations - 499,495
Repayments of long-term obligations (525 ) (400,330 )
Net increase (decrease) in commercial paper outstanding (121,300 ) (237,200 )
Costs associated with issuance and retirement of debt - (4,444 )
Repurchases of common stock (199,986 ) (150,001 )
Payments of cash dividends (82,756 ) (77,657 )
Other equity and related transactions     10,300       2,017  
Net cash provided by (used in) financing activities     (394,267 )     (368,120 )
 
Net increase (decrease) in cash and cash equivalents 35,624 16,529
Cash and cash equivalents, beginning of period     235,487       267,441  
Cash and cash equivalents, end of period   $ 271,111     $ 283,970  
 
Supplemental cash flow information:
Cash paid for:
Interest $ 48,960 $ 43,162
Income taxes $ 19,623 $ 7,274
Supplemental schedule of non-cash investing and financing
activities:
Right of use assets obtained in exchange for new operating lease
liabilities
$ 358,806 $ -

Purchases of property and equipment awaiting processing for
payment, included in Accounts payable

$ 91,384 $ 66,684
 

   
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
Selected Additional Information
(Unaudited)
 
 
Sales by Category (in thousands)
 
For the Quarter Ended
May 3 May 4
2019   2018 % Change
Consumables $ 5,213,155 $ 4,772,388 9.2 %
Seasonal 736,978 691,031 6.6 %
Home products 375,713 354,633 5.9 %
Apparel   297,339     296,411   0.3 %
Net sales $ 6,623,185   $ 6,114,463   8.3 %
 
 
 
 
 
Store Activity
 
For the Quarter Ended
May 3 May 4
2019   2018
 
Beginning store count 15,370 14,534
New store openings 240 241
Store closings   (13 )   (14 )
Net new stores   227     227  
Ending store count   15,597     14,761  
Total selling square footage (000's)   115,468     109,415  
Growth rate (square footage)   5.5 %   8.3 %
 

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