Dollar General Corp. (NYSE: DG) reported earnings today, proving again that low-price retail stores continue to have their day in the sun. Dollar General�s second fiscal quarter earnings were $0.41 on revenue of $3.21 billion. Excluding a one time charge of $6.4 million, the company posted EPS of $0.42. Analysts on average expected EPS of $0.38 on revenue of $3.22 billion.
Dollar General’s earnings, and revised guidance, put the retailer pretty well even with competitors Big Lots Inc. (NYSE: BIG), Family Dollar Stores Inc. (NYSE: FDO), and Dollar Tree, Inc. (NASDAQ: DLTR). Last week Big Lots reported earnings that were a penny better than expectations and revenues that were below estimates. Operating profit at Dollar General rose 29%, compared with a reported 33% at Big Lots.
Dollar General reported same-store sales were up 5.1% for the quarter, and attributed the increase to customer traffic and average transaction amounts. Gross profits rose to 32.2% of sales, “primarily due to higher net markups, partially offset by increased markdowns and higher transportation costs.”
The point here is that the company’s reputation as low-cost supplier gives it some wriggle room on its markups. Customers may search the aisles for all the special marked-down items, but if those markdowns derive from a higher markup, the store’s profits will rise. And that doesn’t include those items that shoppers buy that have been marked up but not marked down.
The plan appears to be working and the company expects it to continue to work throughout the rest of the 2010 fiscal year. Like its competitors, Dollar General has revised its guidance upward for the remaining six months of the year. Dollar General raised its full-year EPS guidance from $1.62-$1.69 to $1.68-$1.74.
Full-year sales are expected to rise 8.5%-10.5% year-over-year, and same-store sales are expected to rise 4%-6% year-over-year. Analysts at Yahoo Finance were expecting sales to rise 10.9% for the year. The store’s new guidance still falls short of that expectation, and the company’s shares are getting hit in early trading. Dollar General shares are off about 1% so far.
As of this writing, Paul Ausick did not own a position in any of the stocks named here.
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