Dollar General Q3 tops Street; reveals 2019 store plans

Dollar General reported better-than-expected third quarter sales and earnings, but cut its full-year outlook on hurricane-related costs.

The discounter also revealed its expansion plans for the upcoming year. It plans to undertake some 2,075 real estate projects in 2019, including 975 new store openings (up from 900 in 2018), 1,000 mature store remodels, and 100 store relocations.

“We remain very excited about our future real estate growth opportunities,” said CEO Todd Vasos. “We believe our ongoing investment in high-return real estate projects, along with our strategic initiatives, will not only continue to drive long-term shareholder value, but will also allow us to further enhance our ability to serve our communities and our customers.

Dollar General’s net income rose to $334.1 million, or $1.26 a share, for the quarter ended Nov. 2, from $252.5 million, or 93 cents a share, in the same period a year ago. Excluding a 5 cents-per-share negative impact from hurricane-related expenses, earnings per share came in at $1.31. Analysts had expected earnings per share of $1.27.

“As a result of the third quarter hurricanes and other disasters, we will record greater-than-anticipated expenses in the second half of 2018,” said John Garratt, Dollar General’s CFO. “In total, the impact to third quarter EPS was an estimated $0.05 per diluted share and we expect to see an additional estimated $0.04 impact on our fourth quarter diluted EPS. We have adjusted our full-year outlook to reflect the estimated $0.09 impact of these events, ongoing transportation cost pressures and year-to-date results.”

Third quarter sales increased 8.7% to $6.42 billion, above estimates of $6.39 billion. Same-store sales rose a better-than-expected 2.7%, driven by an increase in average transaction amount and positive results in the consumables, seasonal and home categories. Customer traffic was essentially flat, the company said.

For fiscal 2018, Dollar General lowered its sales growth outlook to just 9.0% from 9.0% to 9.3% and cut its earnings per share guidance to $5.85 to $6.05 from $5.95 to $6.15. It expects same-store sales growth to be in the middle of the previous range of mid-to-high two percent.