Dollar General cuts profit forecast despite strong quarter
Goodlettsville, Tenn. — Dollar General reported record net income and sales during for the first quarter, but still reduced the top end of its profit forecast due to moderating same-store sales.
The discounter reported net income of $220 million, up 3% from $213 million in the first quarter of 2012. Net sales totaled $4.23 billion, up 8.5% from $3.9 billion.
Same-store sales increased 2.6%, with strong growth in consumables offsetting slower sales in seasonal and weather-sensitive products. Rick Dreiling, chairman and CEO of Dollar General, said continuing slow growth in non-consumable sales caused the company to scale back its profit forecasts.
“We are well positioned for our same-store sales growth to accelerate to 4-5% for the year as our key initiatives, such as the rollout of tobacco and Phase 5 planogram changes, continue to gain traction through the year,” said Dreiling. “Sales of non-consumables are expected to remain challenging, and we anticipate a continued shift to lower margin items within consumables and higher inventory shrink.”
For the 2013 fiscal year, Dollar General expects total sales to increase 10 to 11% from the 2012 fiscal year. Same-store sales are expected to increase 4 to 5%.
Scotts Miracle-Gro board members exit following bad language
Three Scotts Miracle-Gro board members resigned following the delivery of a unanimously supported reprimand of CEO Jim Hagedorn that stemmed from the use of inappropriate language.
Hagedorn apologized in a statement.
"While I have a tendency to use colorful language, I recognize my comments in this case were inappropriate and I apologize," Hagedorn said. "I, along with the rest of our board members, consider the matter resolved and I have made a personal commitment to prevent a future recurrence."
The three recent resignations came from Carl F. Kohrt, PhD, who recently accepted the position as president of his alma mater, Furman University in South Carolina; as well as John S. Shiely and William G. Jurgensen. The company says it will not fill the current vacancies.
The board will likely be reduced in size to eight to 10 members over time as part of the normal nominating and election process.
Scotts added that all three former board members confirmed that their departures were not related to any disagreement relating to the company’s operations, policies, practices or financial reporting.
"Each of these board members served us well for many years, and I want to thank them for their counsel and contributions," said Hagedorn. "I wish them each well in their future endeavors."
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Office Depot to sell joint venture in Latin American operation
Boca Raton, Fla. — Office Depot has reached an agreement to sell its 50% stake in Office Depot de Mexico S.A. de C.V. to its joint venture partner Grupo Gigante, S.A.B. de C.V. for roughly $690 million in cash.
Office Depot de Mexico, which was founded in 1994 as a joint partnership between Office Depot and Grupo Gigante, has more than 248 stores throughout Mexico and Central America and more than $1.1 billion in annual sales.
“Grupo Gigante has been a wonderful partner in Mexico for almost 20 years,” said Steve Schmidt, president of international for Office Depot. “Over the past year, we have been actively exploring with them ways to illuminate the value of this business through a potential IPO. Through the process, they expressed a desire to own the business outright that culminated in the sale announced today.”
Office Depot expects to get $550 million after taxes, which it will use to redeem some convertible shares from private-equity firm BC Partners and to redeem $150 million of bonds that are due in August.
The sale is subject to Mexican regulatory approval and Grupo Gigante S.A.B. de C.V. shareholder approval.
Office Depot noted that, in accordance with the terms of its planned merger agreement with OfficeMax, it had obtained the required consent from OfficeMax to proceed with the sale.
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