Dollar General is making changes in its store portfolio after posting higher comps but lower profits in the fourth quarter while beating Wall Street expectations.
Net income was $191.2 million, or 87 cents per diluted share, versus $401.8 million, or $1.83 per diluted share, in the year-previous period. The income numbers include include a negative impact of 81 cents per diluted share associated with a store portfolio review in the fourth quarter and was primarily because of store closures and pOpshelf impairment charges, resulting in an adjusted diluted income per share figure of $1.68. Dollar General did not post adjustments to income in the year-past quarter.
A Zacks Investment Research analyst consensus estimate called for earnings per adjusted diluted share of $1.50 and revenue of $10.26 billion.
Fourth quarter comparable sales increased 1.2%. Net sales were $10.3 billion versus $9.86 billion in the year-prior quarter. Operating profit was $294.2 million versus $579.7 million in the year-earlier period. The operating profit number for the quarter includes charges of $232 million associated with the store portfolio review and was primarily because of store closures and pOpshelf impairment charges, the company reported.
For the full fiscal year, Dollar General net income was $1.13 billion, or $5.11 per diluted share, versus $1.66 billion, or $7.55 per diluted share, in the year previous.
Fiscal year comparable sales increased 1.4%. Net sales were $40.61 billion versus $38.69 billion in the year prior. Operating profit was $1.71 billion versus $2.45 billion in the year earlier.
In a conference call, Todd Vasos, Dollar General’s CEO, said that as the result of a portfolio review, the company decided to close 96 namesake stores, many in urban and metropolitan ares where it has been difficult to run profitable locations. The company also looked at its pOpshelf operation.
“After analyzing business performance and revised outlooks for our current portfolio of Pop Shelf locations, we identified 51 store closure candidates based on financial and operational considerations from our test and learn phase,” Vasos said. “We plan to convert six of these 51 locations to Dollar General stores and close the remaining 45 stores. This will leave 180 stores remaining as part of the pOpshelf banner.”
Overall, Dollar General portfolio planning for fiscal 2025 covers 4,885 real estate projects in fiscal 2025, including the opening of 575 new stores in the United States and up to 15 new stores in Mexico; fully remodeling 2,000 stores; remodeling approximately 2,250 stores through Project Elevate, the company’s incremental refresh initiative for mature stores not ready for a full refurbishment; and relocating 45 stores.
In announcing the fourth quarter results, Vasos commented on Dollar General company operations and the progress of its “Back to Basics” strategy: “We were pleased with the underlying performance of the business in the fourth quarter, including improved execution and solid top-line results. As we reflect on our full fiscal 2024 year, we believe our Back to Basics work is resonating with customers, as demonstrated by higher customer satisfaction scores and healthy market share gains.”
