Dollar General Corp.(NYSE:DG) is climbing in premarket trading following a big jump in year-end profits, thanks in part to the Trump tax cuts, plus a dividend increase and a favorable outlook for the current fiscal year.
Dollar General was up around 7.5% in premarket trading, at US$95.90 a share.
Dollar General said its net income in the 13 weeks that ended February 2, 2018, shot up 72%, to US712.2mln, or US$2.63 a share, from US$414.2mln, or US$1.49 a share, in the 14 weeks that ended February 3, 2017. Results in the latest fourth quarter got a boost from an income tax benefit of US$113mln that largely was due to the new U.S. tax laws, as the retailer's effective tax rate fell to 18.9% from 36.8% in the year-earlier fourth quarter.
Sales in the quarter rose 2%, to US$6.13bn from US$6.01bn.
For the 52 weeks that ended February 2, 2018, Dollar General posted net income of US$1.54bn, or US$5.63 a share, which was up 23% from earnings of US$1.25bn, or US$4.43 a share, in the 53 weeks that ended February 3, 2017. Revenue for the year increased 6.7%, to US$23.47bn from US$21.99bn.
Big push to open, remodel stores
"I am pleased with our overall fourth-quarter performance, as we delivered strong same-store sales growth of 3.3% while achieving a healthy rate of gross margin expansion," Dollar General CEO Todd Vasos said.
Dollar General said the improvement in same-store sales in the quarter was due to an increase in average transaction amount, partially offset by a slight decline in customer traffic. The company said same-store sales "were driven by positive results in the consumables and seasonal categories, partially offset by negative results in the apparel and home categories."
Vasos said Dollar General for the year "opened a record 1,315 new stores and delivered a same-store sales increase of 2.7%, marking our 28th consecutive year of positive same-store sales growth." The company said it also remodeled or relocated 764 stores. It operates more than 14,500 stores in 44 states.
Board boosts dividend, OKs more buybacks
Dollar General said its board has approved a 12% increase in the quarterly dividend to a new rate of 29 US cents a share from the previous rate of 26 US cents. The increased dividend is payable April 24, 2018, to shareholders of record April 10.
The board also increased the authorization under Dollar General's stock repurchase program by US$1bn. Dollar General said the remaining authorization for future stock purchases as of the end of the fiscal year had been about US$354mln. The company said it bought back US$580mln, or 7.1 million shares, at an average price of US$82.11 a share in the previous fiscal year.
Favorable outlook for current fiscal year
Looking ahead, Dollar General said it expects sales in the 52-week fiscal year ending February 1, 2019, to increase about 9%, with same-store sales growth estimated to be in the mid-2% range. It expects diluted earnings per share for the year to be in the range of US$5.95 to US$6.15. The earnings guidance assumes an estimated effective tax rate of 22% to 23% as Dollar General anticipates a cash benefit of around US$300mln for the year, thanks to the new tax laws.
Dollar General said share repurchases for the year are expected to total around US$850mln, with capital expenditures in the range of US$725mln to US$800mln.
The company plans to open about 900 stores, remodel 1,000 stores and relocate 100 stores in the current fiscal year.