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Category: Stock Market and Dollar General (DG)
Date: 4 December 2020 Stock Price of Dollar General: $214.49 We take a look at the 3rd quarter earnings release of their 2020 fiscal year of Dollar General Corporation a general retailer that operates over 16 200 stores across 44 states. Their 3rd quarter 2020 net sales topped $8.19 billion and they reported net earnings for the 3rd quarter 2020 of $574.2 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 2nd quarter 2020 earnings report
The numbers below refers to the latest quarter unless specified otherwise:
- Total sales: $8.199 billion (up from $6.99 billion from the same quarter of the previous year)
- Sales increased by 17.2% over the last 12 months
- Cost of goods sold: $5.631 billion (up from $4.926 billion for the same quarter of the previous year)
- Cost of goods sold increased by 14.3% over the last 12 months
- Some margin gain for Dollar General as their sales increased at a faster rate than their cost of goods sold
- Net income : $574.2 million (up from $365.55 million for the same quarter of the previous year)
- Diluted income per share: $2.31 (up from $1.42 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 249.06 million (down from 257.7 million for the same quarter of the previous year)
- Cash and cash equivalents: $2.199 billion
- Cash and cash equivalents per share: $8.82
- Cash and cash equivalents makes up 4.1% of Dollar General's market capital
- Cash and cash equivalents makes up 8.4% of Dollar General's total assets
- Inventories: $5.025 billion
- Inventories makes up 19.2% of Dollar General's total assets
- Stockholders equity in Dollar General: $6.985 billion
- Stockholders equity per share: $28
- Dollar General is trading at 7.6 times its stockholders equity which is well outside the expected range of between 2 and 5 times that most firms tend to trade at
- The S&P 500 price to book value is at 3.9 (Click here to find out more details about the S&P 500)
Dollar General's management commentary on their 3rd quarter 2020 earnings report
GOODLETTSVILLE, Tenn.--(BUSINESS WIRE)-- Dollar General Corporation (NYSE: DG) today reported financial results for its fiscal year 2020 third quarter (13 weeks) ended October 30, 2020.
“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,” said Todd Vasos, Dollar General’s chief executive officer. “To further demonstrate our appreciation and support, we plan to award a total of up to $75 million in appreciation bonuses to eligible frontline employees in Q4, which includes our recent announcement to double our initial plans for second-half bonuses by approximately $50 million, bringing the Company’s full-year investment in employee appreciation bonuses to approximately $173 million. Despite continued significant uncertainty in the operating environment, our team members have been unwavering in their commitment to fulfilling our mission of Serving Others. As a result, we are pleased to report strong third-quarter financial results.
“During the quarter, we also continued to make great progress advancing our key strategic initiatives, including the rollout of DG Pickup across nearly our entire store base, and the launch of our newest store format, pOpshelf. In total, we executed 765 real estate projects, further laying and building the foundation for future growth. Overall, our ongoing operating priorities, coupled with our key strategic initiatives, position us well to continue delivering value and convenience for our customers, along with long-term sustainable growth and value for our shareholders.”
- Net Sales Increased 17.3%; Same-Store Sales Increased 12.2%
- Operating Profit Increased 57.3% to $773.1 million
- Diluted Earnings Per Share (“EPS”) Increased 62.7% to $2.31
- Year-to-Date Cash Flows from Operations Increased 103.7% to $3.4 billion
- $990 million Returned to Shareholders through Share Repurchases and Cash Dividend
- Board of Directors Declares Fourth Quarter 2020 Cash Dividend of $0.36 per share
“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,” said Todd Vasos, Dollar General’s chief executive officer. “To further demonstrate our appreciation and support, we plan to award a total of up to $75 million in appreciation bonuses to eligible frontline employees in Q4, which includes our recent announcement to double our initial plans for second-half bonuses by approximately $50 million, bringing the Company’s full-year investment in employee appreciation bonuses to approximately $173 million. Despite continued significant uncertainty in the operating environment, our team members have been unwavering in their commitment to fulfilling our mission of Serving Others. As a result, we are pleased to report strong third-quarter financial results.
“During the quarter, we also continued to make great progress advancing our key strategic initiatives, including the rollout of DG Pickup across nearly our entire store base, and the launch of our newest store format, pOpshelf. In total, we executed 765 real estate projects, further laying and building the foundation for future growth. Overall, our ongoing operating priorities, coupled with our key strategic initiatives, position us well to continue delivering value and convenience for our customers, along with long-term sustainable growth and value for our shareholders.”
Merchandise Inventories
As of October 30, 2020, total merchandise inventories, at cost, were $5.0 billion compared to $4.5 billion as of November 1, 2019, an increase of 5.9% on a per-store basis.
Capital Expenditures
Total additions to property and equipment in the 2020 39-week period were $698 million, including approximately: $304 million for improvements, upgrades, remodels and relocations of existing stores; $209 million for store facilities, primarily for leasehold improvements, fixtures and equipment in new stores; $140 million for distribution and transportation related projects; and $39 million for information systems upgrades and technology-related projects. During the 2020 39-week period, the Company opened 780 new stores, remodeled 1,425 stores and relocated 76 stores.
Share Repurchases
The Company repurchased $902 million of its common stock, or 4.4 million shares, under its share repurchase program at an average price of $204.58 per share in the third quarter of 2020. The total remaining authorization for future repurchases was $1.6 billion at the end of the third quarter of 2020. 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 December 2, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.36 per share on the Company’s common stock, payable on or before January 19, 2021 to shareholders of record on January 5, 2021. 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 2020 Update
As noted above, the Company realized a significant sales benefit in the 39-week period ended October 30, 2020, as a result of COVID-19. In addition, since the end of the third quarter, the Company has continued to experience elevated demand in its stores. As a result, from October 31, 2020 through December 1, 2020, same-store sales increased approximately 14% as compared to the comparable timeframe in the 2019 fiscal year.
Due to the significant uncertainty that continues to exist around the severity and duration of the COVID-19 pandemic, including its impact on the U.S. economy, consumer behavior and the Company’s business, there is a lack of visibility for the remainder of 2020 with many unknowns. Because it is difficult to predict specific outcomes, the Company is not issuing updated fiscal 2020 sales or EPS guidance at this time.
However, for the 52-week fiscal year ending January 29, 2021 (“fiscal year 2020”), the Company continues to expect the following:
Fiscal Year 2021 Store Growth Outlook
For the 52-week fiscal year ending January 28, 2022 (“fiscal year 2021”), the Company plans to execute 2,900 real estate projects, including 1,050 new store openings, 1,750 remodels, and 100 store relocations.
“We are excited to once again accelerate our real estate growth plans in fiscal year 2021,” said Jeff Owen, Dollar General’s chief operating officer. “Our portfolio of high-return real estate projects continues to be a top priority for capital allocation as we look to continue delivering long-term shareholder value. With a robust pipeline in place and plans to execute an average of nearly eight real estate projects per day in fiscal year 2021, we are enthusiastic about the opportunity to further expand our footprint and serve even more customers across the country.”
As of October 30, 2020, total merchandise inventories, at cost, were $5.0 billion compared to $4.5 billion as of November 1, 2019, an increase of 5.9% on a per-store basis.
Capital Expenditures
Total additions to property and equipment in the 2020 39-week period were $698 million, including approximately: $304 million for improvements, upgrades, remodels and relocations of existing stores; $209 million for store facilities, primarily for leasehold improvements, fixtures and equipment in new stores; $140 million for distribution and transportation related projects; and $39 million for information systems upgrades and technology-related projects. During the 2020 39-week period, the Company opened 780 new stores, remodeled 1,425 stores and relocated 76 stores.
Share Repurchases
The Company repurchased $902 million of its common stock, or 4.4 million shares, under its share repurchase program at an average price of $204.58 per share in the third quarter of 2020. The total remaining authorization for future repurchases was $1.6 billion at the end of the third quarter of 2020. 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 December 2, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.36 per share on the Company’s common stock, payable on or before January 19, 2021 to shareholders of record on January 5, 2021. 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 2020 Update
As noted above, the Company realized a significant sales benefit in the 39-week period ended October 30, 2020, as a result of COVID-19. In addition, since the end of the third quarter, the Company has continued to experience elevated demand in its stores. As a result, from October 31, 2020 through December 1, 2020, same-store sales increased approximately 14% as compared to the comparable timeframe in the 2019 fiscal year.
Due to the significant uncertainty that continues to exist around the severity and duration of the COVID-19 pandemic, including its impact on the U.S. economy, consumer behavior and the Company’s business, there is a lack of visibility for the remainder of 2020 with many unknowns. Because it is difficult to predict specific outcomes, the Company is not issuing updated fiscal 2020 sales or EPS guidance at this time.
However, for the 52-week fiscal year ending January 29, 2021 (“fiscal year 2020”), the Company continues to expect the following:
- Share repurchases of approximately $2.5 billion;
- Capital expenditures, including those related to investments in the Company’s strategic initiatives, in the range of $1.0 billion to $1.1 billion; and
- 2,780 real estate projects, including 1,000 new store openings, 1,670 remodels, and 110 store relocations.
Fiscal Year 2021 Store Growth Outlook
For the 52-week fiscal year ending January 28, 2022 (“fiscal year 2021”), the Company plans to execute 2,900 real estate projects, including 1,050 new store openings, 1,750 remodels, and 100 store relocations.
“We are excited to once again accelerate our real estate growth plans in fiscal year 2021,” said Jeff Owen, Dollar General’s chief operating officer. “Our portfolio of high-return real estate projects continues to be a top priority for capital allocation as we look to continue delivering long-term shareholder value. With a robust pipeline in place and plans to execute an average of nearly eight real estate projects per day in fiscal year 2021, we are enthusiastic about the opportunity to further expand our footprint and serve even more customers across the country.”
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