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Dollar General Cites Cautious Outlook

GOODLETTSVILLE, Tenn. — Dollar General here on Tuesday reported third-quarter sales and earnings that exceeded analyst estimates, but sounded a note of caution for the current fourth quarter.

Rick Dreiling

Although sales for Thanksgiving and the start of the holiday season have been “encouraging,” consumers are also exhibiting erratic spending behavior indicating uncertainty about the economy, Rick Dreiling, chief executive officer of the 10,300-store small discounter, told analysts in a conference call. "It is my belief that our core customers are concerned about [their] financial outlook, which is resulting in a dynamic that is driving the current competitive environment to be more promotional,” Dreilling said.

As a result, he said Dollar General is forecasting relatively modest comparable sales gains of 3% to 4%, and flat to slightly decreased gross profits for the quarter. During the fiscal third quarter, which ended Nov. 2, net income of $208 million increased 21.6% on $4 billion in sales, a 10.3% increase. Same-store sales improved by 4%.

Read more: Dollar General to Join S&P 500

Store traffic and average sales per transaction increased during the quarter, but gross profit as a percent of sales fell 20 basis to 30.9%, which Dollar General said reflected higher markdowns, less price inflation and an increased mix of lower-margin consumable items and higher shrink.

The company said it planned to open another 635 new stores during fiscal 2013, including 40 of the larger format Dollar General Plus stores and 20 of its fresh grocery-focused Dollar General Market stores.

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