Dollar General Q4 Profit Rises, But Outlook Below View; CFO Tehle To Retire

(RTTNews) - Discount retailer Dollar General Corp. (DG) on Thursday reported a 10 percent increase in profit for the fourth quarter from last year on higher sales. Earnings per share for the quarter matched analysts' expectations.

Looking ahead, the company forecast earnings for fiscal 2015 below analysts' estimates even as two of its rivals, Family Dollar Stores Inc. (FDO) and Dollar Tree Inc. (DLTR), prepare for a merger.

Dollar General's board of directors authorized an additional $1 billion for share repurchases and also approved the initiation of a regular quarterly cash dividend. Further, the company said its chief financial officer David Tehle will retire in July.

The Goodlettsville, Tennessee-based company's fourth-quarter net income was $355.37 million or $1.17 per share, up from $322.17 million or $1.01 per share in the year-ago period.

On average, 25 analysts polled by Thomson Reuters expected the company to report earnings of $1.17 per share for the quarter. Analysts' estimates typically exclude one-time items.

Net sales for the quarter grew 10 percent to $4.94 billion from $4.49 billion in the comparable quarter last year. Analysts were looking for revenue of $4.95 billion.

Same-store sales for the quarter rose 4.9 percent, resulting from increases in both customer traffic and average transaction amount. Same-store sales increases were driven by strength across all categories, with strong growth across candy and snacks, tobacco, perishables and health care.

Gross profit margin for the quarter declined 23 basis points from last year to 31.7 percent, mainly due to increased sales of lower-margin consumables, including tobacco products and perishables products.

The company noted that the slowdown of receipts of higher margin inventory as a result of the longshoreman labor dispute on the U.S. West Coast had an estimated $0.02 per share impact on gross profit for the quarter and contributed to lower initial markups.

Looking ahead to fiscal 2015, Dollar General forecasts earnings of about $3.85 to $3.95 per share and total sales to increase 8 to 9 percent over the 2014 fiscal year. Same-store sales are expected to increase 3 percent to 3.5 percent.

Street expects the company to earn $3.99 per share on 8.6 percent increase in revenues to $20.54 billion.

The company said it plans to open about 730 new stores in 2015, or 6 percent square footage growth, and relocate or remodel 875 stores. Further, the company plans to accelerate new store openings to 7 percent square footage growth in 2016.

On March 10, 2015, the company's board of directors authorized an additional $1.0 billion for share repurchases, increasing the total remaining authorization for future repurchases to over $1.2 billion. The authorization has no expiration date.

The board also approved the initiation of a regular quarterly cash dividend to shareholders. The first quarter dividend of $0.22 per share will be payable on April 22, 2015 to shareholders of record of the company's common stock on April 8, 2015.

Separately, Dollar General said that David Tehle, executive vice president and chief financial officer, will retire from the company, effective July 1, 2015. He served as the company's CFO for nearly 11 years.

Prior to joining Dollar General in June 2004, Tehle spent seven years with Haggar Corp. as executive vice president and CFO. He has held leadership positions with several manufacturing companies, including vice president of finance for The Stanley Works, Mechanics Tools Division, and vice president of finance and chief financial officer for Hat Brands Inc.

Dollar General said it has started a search for a successor and will consider both internal and external candidates for the job.

DG closed Wednesday's trading at $71.45. In Thursday's pre-market activity, the stock is up $2.38 or 3.33 percent to $73.83.