Despite facing the ongoing headwinds due to supply chain pressures and heightened inflation, Dollar General posted solid financial results for the first quarter, which ended April 29, 2022.
The retailer’s net sales increased by 4.2% to $8.8 billion in the first quarter of 2022 compared to $8.4 billion in the first quarter of 2021. The increase, primarily driven by positive sales contributions from new stores, was partially offset by the slight decline in same-store sales and the impact of store closures.
Same-store sales decreased .1% compared to the first quarter of 2021. The decrease, driven by a decline in customer traffic, was partially offset by an increase in average transaction amount. Same-store sales in the first quarter of 2022 declined in each of the seasonal, apparel and home products categories. This decline was offset by an increase in the consumables category, the company said.
Dollar General's gross profit as a percentage of net sales was 31.3% in the first quarter of 2022 compared to 32.8% in the same period of 2021, a decrease of 151 basis points. This gross profit rate decrease was primarily attributable to a greater proportion of sales coming from the consumables category, which generally has a lower gross profit rate than other product categories; an increased LIFO provision, which was driven by higher product costs; increased transportation costs; an increase in markdowns as a percentage of sales; increased distribution costs; and an increase in inventory damages. These factors were partially offset by higher inventory markups, Dollar General said.
“We are pleased with our start to 2022, and I want to thank each of our team members for their ongoing commitment and dedication to serving our customers every day,” said Todd Vasos, Dollar General’s CEO. “Despite ongoing headwinds due to supply chain pressures and heightened inflation, we remained focused on controlling what we can control and delivered solid financial results, which exceeded our expectations for sales and EPS for the quarter. During the first quarter, we executed more than 800 real estate projects, and made significant progress advancing our key strategic initiatives to enhance the value and convenience proposition for our customers. We continue to drive strategic innovation as we further differentiate Dollar General in the discount retail channel, while delivering long-term sustainable growth and value for our shareholders.”
Dollar General's operating profit for the first quarter of 2022 decreased 17.9% to $746.2 million compared to $908.9 million in the first quarter of 2021. The company reported net income of $552.7 million for the first quarter of 2022, a decrease of 18.5% compared to $677.7 million in the first quarter of 2021.
The retailer's diluted earnings per share decreased 14.5% to $2.41 for the first quarter of 2022 compared to diluted EPS of $2.82 in the first quarter of 2021.
Despite the ongoing uncertainties arising from product cost inflation and continued pressure in the supply chain, the company is updating its sales guidance, and reiterating the remainder of its financial guidance, for the 53-week fiscal year ending Feb. 3, 2023 (the fiscal year 2022) issued on March 17, 2022.
The company now expects net sales growth of approximately 10.0% -10.5%, including an estimated benefit of approximately two percentage points from the 53rd week; compared to its previous expectation of approximately 10%, including an estimated benefit of approximately two percentage points from the 53rd week; and same-store sales growth of approximately 3.0% -3.5%; compared to its previous expectation of 2.5%.
Diluted EPS growth in the range of approximately 12% to 14%, including an estimated benefit of approximately four percentage points from the 53rd week, is expected.
“We are pleased with our strong start to the year,” said John Garratt, Dollar General’s chief financial officer. “As a result of our strong topline performance and current expectations for the remainder of the year, we are raising our net sales and same-store sales guidance for fiscal 2022. Looking ahead, our plans include targeted investments to further enhance the in-store experience, while driving an even greater improvement in in-stock levels and customer service. We believe these investments will position us well to build on our sales momentum as we move ahead.”