Non-consumables growth, aided by merchandise partnerships including Dolly Parton, helped Dollar General boost income, comps and net sales in the first quarter. The company topped Wall Street earnings expectations but came up just short on revenue.
Net income was $444.1 million, or $2 per diluted share, versus $391.9 million, or $1.78 per diluted share, in the year-prior quarter, the company reported.
An analyst consensus estimate published by Zacks Investment Research called for earnings per diluted share of $1.89 and revenues of $10.82 billion.
Comparable sales increased 2% while net sales gained 3.4% to $10.79 billion year over year.
Positive sales contributions from new stores and growth in same-store sales drove the net sales increase, which was partially offset by the impact of store closures. The comp increases resulted from a 1.4% gain in customer traffic and a 0.5% increase in average transaction amount. Comps increased in each of the home, consumables, seasonal and apparel product categories, Dollar General said.
Operating profit was $638.5 million versus $576.1 million in the year-before quarter.
In terms of guidance, Dollar General noted that it continues to expect net sales growth in the range of 3.7% to 4.2% and comps in the range of 2.2% to 2.7%, but the company increased its outlook for diluted earnings per share, now $7.20 to $7.45, versus the previous forecast of $7.10 to $7.35.
On a conference call, Todd Vasos, Dollar General’s CEO, said the company’s work on the non-consumables side of the business has been paying off.
“Our efforts to improve the non-consumable product offering continue to resonate with customers, as evidenced by the 4.6% increase in combined non-consumable comp sales during Q1,” he said
Vasos said Dollar General brand partnerships had contributed to performance, including the Dolly Parton collection, launched last year and the recently introduced Holly Williams home assortment.
Vasos also noted that the largest increase in customer count came from households earning more than $100,000 annually as consumers in general, and particularly those living in rural areas, try to offset the impact of gas price increases by shopping closer to home. Dollar General’s 21,000 stores are located within five miles of 75% of the U.S. population, he noted.
Dollar General opened 190 stores in the first quarter, on its way to 450 across the United States. Dollar General has been expanding its ability to interact with consumers through enhanced home delivery and new stores, he pointed out.
Vasos said in announcing the first quarter financial results: “We are pleased with our first-quarter EPS performance, which exceeded our expectations as strong operating margin expansion more than offset the impact of severe winter weather and higher fuel costs. Our topline results were highlighted by positive customer traffic and balanced category growth, while continued progress on our key initiatives drove another quarter of strong operating profit growth. Looking ahead, we believe the essential nature of our offering and our expansive footprint position us well to navigate the current macroeconomic environment.”
