Dollar General (DG) reported Q3 EPS of $2.33, $0.21 worse than the analyst estimate of $2.54. Revenue for the quarter came in at $9.5 billion versus the consensus estimate of $9.42 billion.
Fiscal Year 2022 Financial Guidance and Store Growth Outlook:
During the third quarter, the Company experienced unanticipated delays in acquiring additional temporary warehouse space sufficient for its inventory needs, which caused inefficiencies within the Company’s internal supply chain. These challenges resulted in higher-than-anticipated supply chain costs, including fees incurred for delays in returning shipping containers, and higher transportation costs caused by the need to service stores from less-than-optimal distribution center alignments.
As a result of these greater-than-anticipated gross margin pressures, which we believe are temporary but will continue to a lesser degree through the fourth quarter of 2022, as well as those related to sales mix, inventory shrink and damages, the Company is updating its diluted EPS guidance for the 53-week fiscal year ending February 3, 2023 (“fiscal year 2022”) from that which was issued on August 25, 2022.
Additionally, the Company is narrowing its expectations for same-store sales growth and capital expenditures within the previously guided ranges, and is reiterating the remainder of its financial guidance for fiscal year 2022 from that which was issued on August 25, 2022. The Company is also providing guidance for same-store sales growth and diluted EPS for the fourth of quarter of fiscal year 2022.
The Company now expects the following:
- Same-store sales growth of approximately 6% - 7% for the fourth quarter of fiscal year 2022, which would result in growth toward the upper end of its previously expected range of 4.0% - 4.5% for fiscal year 2022;
- Diluted EPS in the range of $3.15 - $3.30 for the fourth quarter of fiscal year 2022, which would result in growth in the range of approximately 7% - 8% for fiscal year 2022; compared to its previous expectation in the range of approximately 12% - 14% for fiscal year 2022;
Both the current and previous ranges include an estimated benefit of approximately four percentage points from the 53rd week;
This Diluted EPS guidance assumes an effective tax rate toward the upper end of the previously provided range of 22.0% - 22.5% for fiscal year 2022; and
Capital expenditures, including those related to investments in the Company’s strategic initiatives, of approximately $1.5 billion for fiscal year 2022; compared to its previous expectation in the range of $1.4 billion - $1.5 billion.
The Company continues to expect the following for fiscal year 2022:
Net sales growth of approximately 11%, including an estimated benefit of approximately two percentage points from the 53rd week; and
Share repurchases of approximately $2.75 billion.