Overview of Dollar General (DG) earnings release for the 3rd quarter of their 2021 fiscal year
Category: Dollar General (DG)
Date: 6 December 2021 Stock Price of Dollar General (DG): $222 Market Capital of Dollar General (DG): 51.8 billion We take a look at the 3rd quarter earnings release of their 2021 fiscal year of Dollar General Corporation a general retailer that operates over 16 200 stores across 44 states. Their 3rd quarter 2021 net sales topped $8.51 billion and net earnings came in at $487 million.
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I want to thank our associates for their tireless work over the past several months in helping our customers and communities impacted by the COVID-19 pandemic-Todd Vasos, Dollar General’s chief executive officer"
About Dollar General (DG)
Dollar General Corporation has been delivering value to shoppers for more than 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 16,278 stores in 44 states as of January 31, 2020. 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, KimberlyClark, Kellogg's, General Mills, and PepsiCo.
Overview of Dollar General's 3rd quarter 2021 earnings report
- Net Sales Increased 3.9% to $8.5 Billion
- Same-Store Sales Decreased 0.6%; Increased 11.6% on a two-year stack basis1
- Operating Profit of $665.6 Million, or 7.8% as a percentage of net sales
- Diluted Earnings Per Share (“EPS”) of $2.08, representing a two-year compound annual growth rate of 21.0%
- Year to Date Cash Flows From Operations of $2.2 Billion
- Board of Directors Increases Share Repurchase Program Authorization; Declares Quarterly Cash Dividend of $0.42 per share
Dollar General's management commentary on their 3rd quarter 2021 earnings report
GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)-- Dollar General Corporation (NYSE: DG) today reported financial results for its fiscal year 2021 third quarter (13 weeks) ended October 29, 2021.
1 Same-store sales on a two-year stack basis represents the sum of the Q3 2021 same-store sales decrease and the Q3 2020 same-store sales increase.
“We are pleased with our third quarter results, and I want to thank our associates for their unwavering commitment to meeting the needs of our customers, communities, and each other,” said Todd Vasos, Dollar General’s chief executive officer. “During the quarter, we made meaningful progress advancing our key initiatives, while continuing to successfully deliver for our customers, despite a challenging operating environment.
“We are excited today to announce our real estate growth plans for fiscal year 20222, which consist of nearly 3,000 real estate projects in total, including 1,110 new stores. These plans include the acceleration of our pOpshelf store concept, as we expect to nearly triple our store count next year. Importantly, given the sustained and positive performance of our pOpshelf concept, we plan to further accelerate the pace of new store openings as we move ahead, targeting a total of approximately 1,000 popshelf locations by fiscal year end 2025
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“We are also excited to announce our plans to expand our footprint internationally for the first time, with plans to open up to ten stores in Mexico by the end of fiscal 2022, as we continue to lay the foundation for future growth. “Overall, we remain focused on our mission of Serving Others, and are confident in our plans to drive long-term sustainable growth and value for our shareholders.”
1 Same-store sales on a two-year stack basis represents the sum of the Q3 2021 same-store sales decrease and the Q3 2020 same-store sales increase.
“We are pleased with our third quarter results, and I want to thank our associates for their unwavering commitment to meeting the needs of our customers, communities, and each other,” said Todd Vasos, Dollar General’s chief executive officer. “During the quarter, we made meaningful progress advancing our key initiatives, while continuing to successfully deliver for our customers, despite a challenging operating environment.
“We are excited today to announce our real estate growth plans for fiscal year 20222, which consist of nearly 3,000 real estate projects in total, including 1,110 new stores. These plans include the acceleration of our pOpshelf store concept, as we expect to nearly triple our store count next year. Importantly, given the sustained and positive performance of our pOpshelf concept, we plan to further accelerate the pace of new store openings as we move ahead, targeting a total of approximately 1,000 popshelf locations by fiscal year end 2025
.
“We are also excited to announce our plans to expand our footprint internationally for the first time, with plans to open up to ten stores in Mexico by the end of fiscal 2022, as we continue to lay the foundation for future growth. “Overall, we remain focused on our mission of Serving Others, and are confident in our plans to drive long-term sustainable growth and value for our shareholders.”
Merchandise Inventories
As of October 29, 2021, total merchandise inventories, at cost, were $5.3 billion compared to $5.0 billion as of October 30, 2020, a decrease of 0.1% on a per-store basis.
Capital Expenditures
Total additions to property and equipment in the 39-week period ended October 29, 2021 were $779 million, including approximately: $384 million for improvements, upgrades, remodels and relocations of existing stores; $184 million for store facilities, primarily for leasehold improvements as well as fixtures and equipment in new stores; $178 million for distribution and transportation related projects; and $33 million for information systems upgrades and technology-related projects. During the third quarter of 2021, the Company opened 268 new stores, remodeled 486 stores and relocated 24 stores.
Share Repurchases
In the third quarter of 2021, the Company repurchased $360 million of its common stock, or 1.6 million shares, at an average price of $220.36 per share, under its share repurchase program. The total remaining authorization for future repurchases was $619 million at the end of the third quarter of 2021. On December 1, 2021, the Company’s Board of Directors increased the authorization under the share repurchase program by $2.0 billion. Under the authorization, repurchases may be made from time to time in open market transactions, including pursuant to trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions. The timing, manner and number of shares repurchased will depend on a variety of factors, including price, market conditions, compliance with the covenants and restrictions under the Company’s debt agreements and other factors. The authorization has no expiration date.
Dividend
On November 30, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.42 per share on the Company’s common stock, payable on or before January 18, 2022 to shareholders of record on January 4, 2022. 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.
Fiscal Year 2021 Financial Guidance and Store Growth Outlook
Significant uncertainty continues to exist regarding the recovery from the impact of the COVID-19 pandemic, including its impact on the U.S. economy, consumer behavior and the Company’s business, which makes it difficult for the Company to predict specific financial outcomes for the fiscal year ending January 28, 2022 (“fiscal year 2021”). In addition, such outcomes could be impacted by several variables, which include, but are not limited to, economic recovery, employment levels, COVID-19 vaccine status, continued or additional disruptions to the supply chain, and the ongoing impact of the COVID-19 pandemic, including new variants of concern and any corresponding governmental measures such as closures of schools or businesses, as well as any potential impacts from the recently issued federal vaccination and testing mandate.
Despite this uncertainty, the Company is updating its financial guidance issued on August 26, 2021 as a result of its strong results in the first three quarters of the year.
For fiscal year 2021, the Company now expects the following:
In addition, the Company continues to expect share repurchases of approximately $2.4 billion, and is reiterating its plans to execute 2,900 real estate projects in fiscal year 2021, including 1,050 new store openings, 1,750 store remodels, and 100 store relocations.
Same-store sales on a two-year stack basis represents the sum of actual 2020 same-store sales and the corresponding low and high ends of the 2021 guidance range.
Two-year compound annual growth rates utilize 2019 diluted EPS and 2019 Adjusted diluted EPS (see “Non-GAAP Disclosure” herein) as the base.
Fiscal Year 2022 Store Growth Outlook
For fiscal year 2022, the Company plans to execute 2,980 real estate projects, including 1,110 new store openings, 1,750 remodels, and 120 store relocations.
As of October 29, 2021, total merchandise inventories, at cost, were $5.3 billion compared to $5.0 billion as of October 30, 2020, a decrease of 0.1% on a per-store basis.
Capital Expenditures
Total additions to property and equipment in the 39-week period ended October 29, 2021 were $779 million, including approximately: $384 million for improvements, upgrades, remodels and relocations of existing stores; $184 million for store facilities, primarily for leasehold improvements as well as fixtures and equipment in new stores; $178 million for distribution and transportation related projects; and $33 million for information systems upgrades and technology-related projects. During the third quarter of 2021, the Company opened 268 new stores, remodeled 486 stores and relocated 24 stores.
Share Repurchases
In the third quarter of 2021, the Company repurchased $360 million of its common stock, or 1.6 million shares, at an average price of $220.36 per share, under its share repurchase program. The total remaining authorization for future repurchases was $619 million at the end of the third quarter of 2021. On December 1, 2021, the Company’s Board of Directors increased the authorization under the share repurchase program by $2.0 billion. Under the authorization, repurchases may be made from time to time in open market transactions, including pursuant to trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions. The timing, manner and number of shares repurchased will depend on a variety of factors, including price, market conditions, compliance with the covenants and restrictions under the Company’s debt agreements and other factors. The authorization has no expiration date.
Dividend
On November 30, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.42 per share on the Company’s common stock, payable on or before January 18, 2022 to shareholders of record on January 4, 2022. 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.
Fiscal Year 2021 Financial Guidance and Store Growth Outlook
Significant uncertainty continues to exist regarding the recovery from the impact of the COVID-19 pandemic, including its impact on the U.S. economy, consumer behavior and the Company’s business, which makes it difficult for the Company to predict specific financial outcomes for the fiscal year ending January 28, 2022 (“fiscal year 2021”). In addition, such outcomes could be impacted by several variables, which include, but are not limited to, economic recovery, employment levels, COVID-19 vaccine status, continued or additional disruptions to the supply chain, and the ongoing impact of the COVID-19 pandemic, including new variants of concern and any corresponding governmental measures such as closures of schools or businesses, as well as any potential impacts from the recently issued federal vaccination and testing mandate.
Despite this uncertainty, the Company is updating its financial guidance issued on August 26, 2021 as a result of its strong results in the first three quarters of the year.
For fiscal year 2021, the Company now expects the following:
- Net sales growth of approximately 1.0% to 1.5%; compared to its previous expectation in the range of 0.5% to 1.5%.
- Same-store sales decline of approximately 3.0% to 2.5%, which reflects growth of approximately 13% to 14% on a two-year stack basis4; compared to its previous expectation of a decline of 3.5% to 2.5%.
- Diluted EPS in the range of $9.90 to $10.20, which reflects a compound annual growth rate in the range of 22% to 24% (or in the range of approximately 21% to 23% compared to 2019 Adjusted diluted EPS) over a two-year period5; compared to its previous expectation in the range of $9.60 to $10.20.
- This Diluted EPS guidance assumes an effective tax rate of approximately 22%, compared to its previous expectation in the range of 22% to 22.5%.
In addition, the Company continues to expect share repurchases of approximately $2.4 billion, and is reiterating its plans to execute 2,900 real estate projects in fiscal year 2021, including 1,050 new store openings, 1,750 store remodels, and 100 store relocations.
Same-store sales on a two-year stack basis represents the sum of actual 2020 same-store sales and the corresponding low and high ends of the 2021 guidance range.
Two-year compound annual growth rates utilize 2019 diluted EPS and 2019 Adjusted diluted EPS (see “Non-GAAP Disclosure” herein) as the base.
Fiscal Year 2022 Store Growth Outlook
For fiscal year 2022, the Company plans to execute 2,980 real estate projects, including 1,110 new store openings, 1,750 remodels, and 120 store relocations.
Dollar General (NYSE:DG) stock price history over the last 5 years
The image below, obtained from Google, shows the stock price history of Dollar General over the last 5 years, and its been a very good time for Dollar General stockholders. 5 years ago the stock of Dollar General was trading at around $69 and its currently trading at $214.49. That's a very strong return of 210.9% provided to Dollar General stockholders over the last 5 years.
The stock of Dollar General is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Dollar General is very positive at this point in time.
The stock of Dollar General is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Dollar General is very positive at this point in time.
Dollar General (DG) stock vs Dollar Tree (DLTR) stock over the last 5 years
The image below shows the stock price return of Dollar General (DG) and Dollar Tree (DLTR) over the last 5 years. While both these stocks are active in the retail space in the USA, their stock price trends and returns are very different. The summary below shows the stock price returns of these two stocks over the last 5 years.
The stock of Dollar General has therefore easily outperformed that of Dollar Tree over the last 5 years.
- Dollar General (DG): 210.9%
- Dollar Tree (DLTR): 41.03%
The stock of Dollar General has therefore easily outperformed that of Dollar Tree over the last 5 years.
Recent coverage of Dollar General
The extract below discusses the latest earnings report from Dollar General as obtained from Investors.com
Dollar General Earnings
Estimates: Analysts expected Dollar General earnings per share to jump 40% to $1.99 as revenue grew 16.4% to $8.14 billion, according to Zacks Investment Research. Same-store sales were seen rising 11.5%, according to Consensus Metrix.
Results: Dollar General earnings per share leapt 63% to $2.31 a share, with revenue up 17.3% to $8.2 billion. Same-store sales popped 12.2%.
Dollar General's store foot traffic soared nearly 21% the Saturday before Black Friday, according to industry tracker Placer.ai. While most retailers saw a big drop in foot traffic on Black Friday compared to last year, Dollar General managed to eke out a gain of 0.6%.
Read the full article here
Dollar General Earnings
Estimates: Analysts expected Dollar General earnings per share to jump 40% to $1.99 as revenue grew 16.4% to $8.14 billion, according to Zacks Investment Research. Same-store sales were seen rising 11.5%, according to Consensus Metrix.
Results: Dollar General earnings per share leapt 63% to $2.31 a share, with revenue up 17.3% to $8.2 billion. Same-store sales popped 12.2%.
Dollar General's store foot traffic soared nearly 21% the Saturday before Black Friday, according to industry tracker Placer.ai. While most retailers saw a big drop in foot traffic on Black Friday compared to last year, Dollar General managed to eke out a gain of 0.6%.
Read the full article here
Dollar General (NYSE: DG) latest stock valuation
So based on the 3rd quarter 2020 earnings report what do we value Dollar General stock at? Based on the earnings reported by Dollar General our valuation model provides a target price (full value price) for Dollar General at $182.20 a stock.
We therefore believe the stock is overvalued at its current price. We usually recommend that long term fundamental or value investors look to enter the stock at least 10% below our target price (full value price) of $182.20. Therefore we believe a good entry point into Del Taco's stock would be at $164.20 or below.
We expect the stock of Dollar General to pull back slightly in coming weeks and months to levels closer to our target price. Since the stock of Dollar General (DG) is trading at well above our target price we rate the stock of Dollar General as a sell.
We therefore believe the stock is overvalued at its current price. We usually recommend that long term fundamental or value investors look to enter the stock at least 10% below our target price (full value price) of $182.20. Therefore we believe a good entry point into Del Taco's stock would be at $164.20 or below.
We expect the stock of Dollar General to pull back slightly in coming weeks and months to levels closer to our target price. Since the stock of Dollar General (DG) is trading at well above our target price we rate the stock of Dollar General as a sell.
Next earnings release of Dollar General
It is expected that Dollar General will release their 3rd quarter 2020 earnings towards the end of November 2020