Dollar General is lessening its expectations for the rest of fiscal year 2023, but overall, the discount retailer likes the position it is in following first quarter earnings.
During the first 13 weeks of the year, which ended on May 5, Dollar General experienced year-over-year increases in net sales (6.8%) and same-store sales (1.6%) while taking a slight hit in operating profit, which was down 0.7% to just over $740 million.
“While the macroeconomic environment has been more challenging than expected, particularly for our core customer, we are confident in Dollar General’s ability to deliver strong growth in the years ahead, despite the near-term pressure which impacted our first quarter sales results and is anticipated to impact our full-year sales and EPS,” said Dollar General CEO Jeff Owen.
Owen stressed that the company is “controlling what we can control.” According to Owen, that looks includes supply chain recovery efforts and customer service enhancements, including a previously announced investment in incremental labor hours.
In addition, the company moved forward on over 800 real estate projects, including new store openings in larger footprint Dollar General formats, which Owen said continue to outperform expectations and drive higher sales productivity compared to the company’s traditional stores.
Despite the optimism, Dollar General has adjusted its fiscal year 2023 outlook. The retailer was originally calling for net sales growth in the range of 5.5% to 6%, but is now planning on a rise of 3.5% to 5%. Same-store sales growth was set at 3% to 3.5%, but has been revised to 1% to 2%. Capital expenditures, however, also have been lowered from as much as $1.9 billion originally to $1.6-1.7 billion.
Along with the drop in financial earnings, Dollar General also is tapping the brakes on growth. The retailer expects to complete 3,110 projects this year instead of 3,170. There will be 990 new store openings, 2,000 remodels, and 120 store relocations.
Breaking down first quarter earnings further, net sales totaled $9.3 billion compared to $8.8 billion in Q1 2022. Net income, however, was down compared to a year ago. There, Dollar General brought in $514.4 million in Q1 2023, which is a decrease of 6.9% vs. 2022 ($552.7 million). Gross profit as a percentage of net sales was 31.6% in the first quarter of 2023, which is a slight uptick from Q1 2022 (31.3%).