Dollar General Corporation — Form 10-Q Summary
Period mismatch: Request metadata identifies 2020 Q1, but this filing covers the 13 weeks ended April 30, 2021 (fiscal 2021 Q1), compared with the 13 weeks ended May 1, 2020. The interim financial statements are unaudited; the independent accountant performed a review, not an audit.
Business context and reporting period
Dollar General operated 17,426 stores in 46 states at quarter-end, selling consumable and non-consumable merchandise through discount stores. COVID-19-related demand and government stimulus affected both periods, making comparisons and historical seasonal patterns less representative.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Net sales | $8.401 billion | $8.448 billion | Down 0.6% |
| Gross profit / margin | $2.756 billion / 32.80% | $2.596 billion / 30.72% | Profit up 6.2%; margin up 208 bps |
| SG&A / sales | $1.847 billion / 21.98% | $1.729 billion / 20.46% | Expense up 6.8%; rate up 152 bps |
| Operating profit | $908.9 million | $866.8 million | Up 4.9% |
| Net income | $677.7 million | $650.4 million | Up 4.2% |
| Diluted EPS | $2.82 | $2.56 | Up 10.2% |
| Operating cash flow | $703.0 million | $1.736 billion | Down $1.033 billion |
Same-store sales fell 4.6%, primarily from lower customer traffic, partly offset by higher average transaction value. Consumables sales declined 4.9%; seasonal, home products, and apparel sales rose 14.4%, 14.7%, and 22.0%, respectively. Management attributed the stronger non-consumables mix in part to stimulus-related demand. Gross-margin improvement reflected higher initial markups, fewer markdowns, lower shrink, and product mix; higher transportation costs partly offset those benefits. SG&A pressure included occupancy, retail labor, depreciation, administrative compensation, and Winter Storm Uri costs. Interest expense rose $9.9 million to $40.4 million, primarily due to higher average debt balances. The effective tax rate was 22.0%, versus 22.2%.
Balance sheet, debt, and liquidity
- At April 30, 2021, cash was $688.1 million, inventory $5.099 billion, and total assets $25.237 billion.
- Long-term obligations were $4.131 billion, principally senior notes; no company commercial paper or revolving-facility borrowings were outstanding. Operating lease liabilities totaled approximately $9.601 billion, current and long term.
- The $1.25 billion revolving facility had approximately $1.25 billion of stated availability, with about $1.07 billion of incremental liquidity after reserving availability for the commercial paper program. The company reported covenant compliance.
- Operating cash flow was lower year over year, partly reflecting changes in inventory-related cash benefits, accounts payable, and accrued liabilities. Investing cash outflow was $276.9 million, including $277.7 million of property and equipment purchases; financing cash outflow was $1.115 billion, largely reflecting $1.000 billion of share repurchases and $99.8 million of dividends.
Material changes, outlook, and risks
- The company repurchased about 5.0 million shares for $1.0 billion, compared with about 0.5 million shares for $63.1 million in the prior-year quarter. The remaining authorization was approximately $1.68 billion. The quarterly dividend was $0.42 per share; a further $0.42 dividend was declared after quarter-end.
- Fiscal 2021 plans included approximately 1,050 new stores, 1,750 remodels, and 100 relocations. Capital expenditures were projected at $1.05–$1.15 billion. Management anticipated maximum combined revolving-facility and commercial-paper borrowings of approximately $500 million at any one time for the rest of fiscal 2021.
- Management planned to expand NCI/NCI Lite to more than 11,000 stores by year-end and complete the initial chain rollout by fiscal 2022. DG Fresh was expected to complete its initial distribution-facility rollout by the end of Q2 2021; pOpshelf plans included up to 50 locations and up to 25 store-within-a-store offerings by fiscal year-end.
- Management said pandemic effects, including demand patterns, supply-chain constraints, and additional safety and operating costs, remained uncertain. It expected some vendor shortages to persist through at least the first half of 2021. Rising input, commodity, transportation, and labor costs could pressure results; planned mitigation may not succeed. The company also noted that interim results may not predict full-year performance.
- Motor-oil litigation remained a contingency: the multistate class settlement had preliminary approval, with final approval pending; New Mexico and Louisiana matters were settled for amounts described as immaterial. The company stated that adverse litigation developments could nevertheless affect future results or liquidity.
Important facts for investors to verify
- Confirm the intended period: the supplied filing is fiscal 2021 Q1, not 2020 Q1.
- Assess whether improved gross margin and non-consumables demand can offset lower same-store sales, elevated SG&A, and cost inflation as stimulus effects and pandemic comparisons change.
- Review the drivers and sustainability of lower operating cash flow, planned capital spending, and substantial repurchases and dividends.
- Monitor inventory levels, supply constraints, debt and lease obligations, and the final approval and outcomes of pending litigation.