Cost optimization helps Dollar General post strong results in Q2

For the second quarter, Dollar General  Corporation (NYSE: DG) said its adjusted earnings rose to $1.74 per share compared to $1.52 per share in the year-over period, fuelled by more disciplined cost control measures as well as category management. The bottom-line was 17 cents higher than the Wall Street projection.

The adjusted earnings included certain legal expenses and after-tax impact.

Dollar General and its peer Dollar Tree (NASDAQ: DLTR) were slapped with fines amounting to $1.2 million on Monday for selling expired products. Both chains allegedly sold over-the-counter drugs that were expired, while Dollar General was penalized for selling obsolete motor oil that was not suitable for modern cars. 

Net sales for the second quarter rose 8.4% to $6.98 billion, vs $6.89 billion expected by the street. The top line was boosted by a 4% growth in same-store sales and positive sales contributions from new stores.

Except in the apparel category, same-store sales grew in all other units.

Dollar General has been investing in expanding and remodeling its stores, improving its assortment, as well as in other business growth initiatives.

DG shares rose 6.5% during pre-market trading on Thursday. Dollar General’s shares have gained 29% year-to-date.

READ: JCPenney reports 9% decline in comparable sales in Q2

Outlook

For the fiscal year 2019, Dollar General now expects net sales growth of approx 8%, compared to its previous expectation of 7%.  Growth in same-store sales is currently projected to be in the low-to-mid 3% range, compared to its previous expectation of about 2.5%.

Due to the legal expenses, adjusted EPS for this period is forecast to be $6.45 to $6.60.

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