Dollar General Q2 sales fall short

Dollar General Corp. reported lower-than-expected revenue for the second quarter amid increasing competition and reduced food stamp coverage.



The company’s net income was $306.52 million, or $1.08 per share, in the quarter, compared to net income of $282.35 million, or $0.95 per share, in the year-ago period.



Net sales increased 5.8% to $5.39 billion, compared to $5.10 billion last year.



Same-store sales edged up 0.7%, driven primarily by an increase in average transaction amount offset by a decline in traffic.



Dollar General and other discounters have been impacted by change in some states regarding the criteria for the Supplemental Nutrition Assistance Program (SNAP), which has resulted in thousands of households being ineligible for benefits.



“Retail food deflation and a reduction in both SNAP participation rates and benefit levels, coupled with unseasonably mild spring weather, proved to be stronger than expected headwinds to our business,” said Todd Vasos, Dollar General’s CEO.



“The competitive environment also intensified in select regions of the country. Importantly, even amidst a challenging sales environment, we effectively managed our gross profit margin and leveraged our selling, general and administrative expense as a percent of sales.”



The retailer said it continues to expect earnings per share in fiscal 2016 to fall within the 10% to 15% range.



"For the second half of the year, we have action plans across both merchandising and store operations intended to drive same-store sales while maintaining strict expense control discipline," said Vasos. "Looking ahead, we remain focused on our long-term strategy to invest for growth while also returning cash to shareholders through consistent share repurchases and anticipated quarterly dividends.”