Dollar General Corp (NYSE:DG) plans to raise wages for store managers after the US discount retailer reported a 13.7% increase in fourth quarter sales.
The company said it has earmarked about $70mln in 2017, which will be used mainly to hike compensation and provide more training for store managers.
“While these investments are expected to put pressure on our 2017 earnings, we believe they will strengthen our market share position over time and are positive steps to further support sustainable growth for our shareholders over the long term,” said chief executive Todd Vasos.
The company reported sales of US$6.0bn in the fourth quarter, compared to US$5.3bn the same period a year earlier, supported by higher average spend at its stores. Same-store sales grew 1.0%.
Net income increased to US$414.2mln, or US$1.49 per share, from US$376.2mln, or US$1.30 per share, the previous year.
Analysts had been expecting sales of US$5.97bn and earnings of US$1.41 per share, according to a Thomson Reuters poll.
Dollar General estimates earnings per share (EPS) between US$4.25 and US$4.50 for the year ended 2 February 2018. It reported EPS of $4.43 in the year to 3 February 2017, compared to US$3.95 the prior year.
The figures come as Dollar General and its rival Dollar Tree contend with fierce competition from Wal-Mart and Target Corp, which have been discounting heavily to attract customers.
In 2015 Wal-Mart also invested US$2.7bn on wages and training, which it claims lifted sales last year and improved its service.
Shares in Dollar General rose 1.83% to US$74.14 in early US trading.