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Dollar General Corporation (NYSE: DG) has released its financial results for the second quarter of fiscal 2024, which ended on August 2, 2024.

The company reported a net sales increase of 4.2% to $10.2 billion, up from $9.8 billion in the same period last year. This growth was driven primarily by contributions from new stores and a modest increase in same-store sales by 0.5%. However, the company also experienced a decrease in operating profit by 20.6% to $550.0 million and a reduction in diluted earnings per share (EPS) by 20.2% to $1.70.

Despite the increase in customer traffic, Dollar General’s financial performance fell short of its own expectations. CEO Todd Vasos attributed the softer sales trends to the financial constraints faced by core customers.

The company saw growth in the consumables category, but this was offset by declines in seasonal, home, and apparel categories. Gross profit as a percentage of net sales decreased to 30.0%, down from 31.1% in the same quarter last year, primarily due to increased markdowns, inventory damages, and shrink.
 

Dollar General Fails to Meet Expectations in Q2

When comparing Dollar General’s current performance against market expectations, it’s clear the company did not meet analysts’ forecasts. The expected EPS for the quarter was $1.80, but the actual EPS came in at $1.70, a 20.2% decrease from the previous year.

Similarly, the company reported revenue of $10.2 billion, missing the expected $10.38 billion. The shortfall in revenue and earnings can be attributed to several factors, including increased costs in retail labor, depreciation, store occupancy, and utilities, which collectively increased SG&A expenses as a percentage of net sales to 24.6%, up from 24.0%.

Another significant factor contributing to the underperformance was the decrease in operating profit, which fell to $550.0 million from $692.3 million in the previous year. This was driven by a combination of lower gross profit margins and higher operating expenses. Additionally, net interest expense decreased by 19.2% to $68.1 million, but this was not enough to offset the overall decline in profitability.
 

Dollar General Lowers Outlook for Fiscal Year 2024

Looking ahead, Dollar General has updated its financial guidance for fiscal year 2024 to reflect the ongoing softer sales trends and related gross margin impacts. The company now anticipates net sales growth in the range of 4.7% to 5.3%, down from the previous expectation of 6.0% to 6.7%.

Same-store sales growth is now expected to be between 1.0% and 1.6%, compared to the earlier forecast of 2.0% to 2.7%. Additionally, the company has revised its diluted EPS guidance to a range of $5.50 to $6.20, down from the previous expectation of $6.80 to $7.55.

The updated guidance also includes an assumption of no share repurchases for the fiscal year 2024. Capital expenditures are expected to be between $1.3 billion and $1.4 billion, reflecting investments in strategic initiatives.

The company plans to undertake 2,435 real estate projects, including 730 new store openings, 1,620 remodels, and 85 store relocations. Despite the challenging retail environment, Dollar General remains committed to enhancing its value and convenience offerings while focusing on long-term shareholder value.

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