Dollar General Corp. reported its biggest same-store rise in more than 10 years amid surging demand driven by the COVID-19 pandemic.
The discounter on Thursday reported first-quarter sales and earnings that blew past Street estimates. And while many retailers have scaled back 2020 store openings and remodeling plans, Dollar General remains committed to its previously announced projects. It is still planning 1,000 new stores, 1,500 mature store remodels and 80 store relocations in fiscal 2020.
Dollar General’s net income surged to $650 million, or $2.56 a share, in the quarter ended May 1, up from $385 million, or $1.48 a share, in the year-ago period. Analysts had expected earnings of $1.75. Operating profit increased 69.2% to $866.8 million.
Sales rose 27.6% to $8.4 billion, beating Street estimates of $7.6 billion.
Same-store sales rose 21.7%, well ahead of estimates, driven by increases in average transaction amount and customer traffic. Same-store sales increased in the consumables, seasonal, home products and apparel categories, with the largest percentage increase in the home products category.
In comments, analyst Neil Saunders said that one of the reasons Dollar General did so well in the quarter was because its logistics and operations are extremely efficient and effective.
“It coped admirably with the massive rise in volumes and did so while maintaining the relative simplicity of its business,” said Saunders, managing director, GlobalData Retail. “This is one of the reasons why profits rose so sharply: Dollar General is not an overly complex firm and an uptick in trade falls more easily to the bottom line than it does at retailers with web operations, varied store formats, and so forth.” (Click here for more commentary.)
Since the end of the first quarter, Dollar General said it has continued to experience elevated demand in its stores, although with slightly more variability and some moderation in recent days. Through May 26, 2020, same-store sales have increased approximately 22% as compared to the comparable period last year.
“In the midst of a very challenging operating environment, our team members have been tirelessly committed to fulfilling the company’s mission of Serving Others, and we could not be more proud of how they have responded to the needs of our communities, said Todd Vasos, Dollar General’s CEO. “As a result of their efforts, we are very pleased to report strong first-quarter financial results. “Looking ahead, we remain committed to our operating priorities and strategic initiatives to drive continued growth and meaningful long-term value for shareholders.”
Dollar General said it has paid about $60 million in bonuses to front-line workers, and temporarily adjusted benefits and leave policies, including offering additional paid time off for those who received a COVID-19 diagnosis or who were required to care for an immediate family or household member who received a COVID-19 diagnosis. It has provided masks, gloves and other protective equipment to workers and implemented social-distancing measures inside stores, including the chain-wide installation of plexiglass barriers at checkout registers, and distribution centers.
To enhance its liquidity position, Dollar General issued $1.0 billion of 3.5% senior notes due in 2030 and $500 million of 4.125% senior notes due in 2050.
As of May 1, Dollar General had $2.7 billion in cash and cash equivalents as well as $1.1 billion of availability under a revolving credit facility.
Dollar General operated 16,500 stores in 46 states as of May 1, 2020.