After a year that has included controversy over workplace safety violations and a CEO swap, Dollar General had mixed news for shareholders during its third-quarter earnings call today.
The dollar store company‘s net sales for the third quarter increased by 2.4 percent to $9.7 billion compared to $9.5 billion during the same period in 2022. But while net sales increased, same-store sales dropped by 1.3 percent, which the retailer attributed to a decline in average transaction amount. Same-store sales declined across several categories, including apparel, home, seasonal and consumables.
Related Stories
Gross profit as a percentage of net sales was 29.0 percent compared to 30.5 percent during the same quarter last year, a drop of 147 basis points. Dollar General pointed to increased shrink, along with lower markups and more markdowns, as the drivers of the decline.
New CEO Todd Vasos—who previously served in the role for the company and came out of retirement in October after the ouster of Jeff Owen—admitted Dollar General still has work ahead but remained positive about its earnings.
“While we are not satisfied with our financial results for the third quarter, including a significant headwind from inventory shrink, we are pleased with the momentum in some of the underlying sales trends, including positive customer traffic, as well as market share gains in both dollars and units,” he said. “We continue to believe our model is relevant in all economic cycles, and we are working diligently to further enhance our unique combination of value and convenience.”
The company’s net income dropped 47.5 percent compared to third quarter 2022, from $526.2 million last year to $276.2 million this year.
SG&A expenses as a percentage of net sales came in at 24.5 percent, an increase of 183 basis points. Operating profit for the third quarter decreased 41.1 percent to $433.5 million compared to $735.5 million during the same period last year.
Looking at merchandise inventory, as of Nov. 3, Dollar General stood at $7.4 billion compared to $7.1 billion on Oct. 28, 2022, a drop of 1.8 percent on a per-store basis.
Dollar General’s capital expenditures—which include remodels, relocations, upgrades and more—came in at $1.2 billion for the 39-week period ending Nov. 3. Vasos told shareholders the company will slow its real estate growth plans in 2024 with 800 new stores, 1,500 remodels and 85 relocations planned.
“This is a modest slowdown compared to the number of projects in recent years, which we believe is prudent in this environment,” he said. “We are excited about the opportunities these projects provide to serve both new and existing customers, while also driving strong financial returns for the business and laying the foundation for future growth. Looking ahead, we are confident in this business model and its ability to create long-term shareholder value.”
Looking ahead to fiscal 2024, Dollar General said it expects a net sales growth in the range of 1.5 to 2.5 percent and same-store sales growth to stay flat or decline by 1 percent.
Vasos came back to Dollar General this fall after the company was hit with millions of dollars in fines from the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) for what it called “willful, repeat and serious” workplace safety violations. The violations, along with complaints that the store doesn’t do enough to protect its workers from armed robberies, led to protests at the company’s Nashville, Tenn., headquarters in May.
In the wake of that backlash, Dollar General, which operates some 18,000 stores nationwide, booted its CEO and called in Vasos, who helmed the company from 2015-2022, and served on its board from April to October 2023.
Vasos told investors on the company’s earnings call that he understands the challenges Dollar General faces, and he remains optimistic that he and his team will be able to overcome them going forward.
“We have some hard work yet ahead of us, but we know what to do,” he said. “We’ve done it before, and we are absolutely set on doing it again, as quickly as possible.”
