Categories Analysis, Retail

Key takeaways from Dollar General’s (DG) Q4 2023 earnings report

EPS is expected to range between $6.80-7.55 for FY2024

Shares of Dollar General Corporation (NYSE: DG) fell over 4% on Thursday despite the company delivering better-than-expected earnings results for the fourth quarter of 2023. The top and bottom line numbers declined compared to the prior-year period but surpassed estimates. Here are the key takeaways from the Q4 report:

Results beat estimates

Dollar General’s net sales in Q4 2023 decreased 3.4% year-over-year to $9.9 billion, but beat estimates of $9.7 billion. The sales decrease was mainly due to the period having one less week of sales than the year-ago period. Sales was also impacted by store closures, partly offset by same-store sales growth and positive sales contributions from new stores. EPS decreased 38% to $1.83 but exceeded projections of $1.74.  

Business performance

In Q4, Dollar General’s same-store sales inched up 0.7%, helped by a rise in traffic, partly offset by a drop in average transaction amount. The company saw same-store sales growth in the consumables category, which was partly offset by declines in the remaining categories of home products, apparel and seasonal.

DG recorded net sales declines across all its categories during the fourth quarter, with the highest of 11.7% in home products. Seasonal and apparel dropped 7.3% and 7.9% respectively while consumables dipped 1.9%.

Gross profit margin dropped 138 basis points to 29.5% in Q4, mainly due to higher shrink and inventory markdowns, lower inventory mark-ups, and a larger proportion of sales coming from the low-margin consumables category.

Outlook

For the first quarter of 2024, Dollar General expects same-store sales growth of 1.5-2.0% and EPS of $1.50-1.60.

“While we anticipate the first quarter will be pressured by our lowest expected same-store-sales increase of any quarter in fiscal 2024, as well as the annualization of prior year headwinds such as retail labor and shrink, we are focused on delivering our full year plans, including anticipated strong EPS growth in the back half of the year.”Kelly Dilts, CFO, Dollar General

For the full year of 2024, the company expects net sales to grow approx. 6.0-6.7% and same-store sales to grow 2.0-2.7%. EPS is expected to range between $6.80-7.55. DG expects to undertake around 800 new store openings, 1,500 remodels, and 85 store relocations in FY2024.

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