Dollar General beats Street; to open 1,000 stores and hike store managers pay

Dollar General on Thursday reported better-than-expected fourth quarter sales and earnings and said it planned to raise compensation and increase training for store managers.



The discounter also said it plans to open approximately 1,000 stores and remodel or relocate 900 existing stores in fiscal 2017.



Dollar General’s net income rose to $414.2 million or $1.49 per share in the fourth quarter, from $376.2 million or $1.30 per share a year earlier. Analysts on average had expected earnings of $1.41 per share.



Net sales increased 13.7% to $6.0 billion in quarter.



Same-store sales increased 1.0% from the year-ago period, primarily due to an increase in average transaction amount, partially offset by a slight decline in traffic that moderated from the second and third quarters.



Same-store sales were driven by positive results in the consumables and home products categories, partially offset by negative results in the seasonal and apparel categories.



Dollar General said on Thursday it would hike compensation and provide more training for its store managers, a move that it hopes will improve service quality in stores over time but will pressure earnings this year.



Dollar General said its manager pay hike would put pressure on earning this year. It forecast earnings of $4.25 to $4.50 per share for the year ending February 2018, below the average analyst estimate of $4.39.



“Dollar General is well-positioned to serve our customers with value and convenience given our plans to open approximately 1,000 new stores in 2017,” said Todd Vasos, Dollar General’s CEO. “To strengthen our position for the long term, we are making significant investments, primarily in compensation and training for our store managers given the critical role this position plays in our customer experience, as well as strategic initiatives. While these investments are expected to put pressure on our 2017 earnings, we believe they will strengthen our market share position over time and are positive steps to further support sustainable growth for our shareholders over the long term.”



Dollar General’s full year 2016 net sales increased 7.9% to $22.0 billion. Same-store sales increased 0.9%. During 2016, the company opened 900 new stores and remodeled or relocated 906 stores.