Dollar General Corp stock falls after Q2 results due to missed expected EPS and Revenue. The discount retailer slashed its sales and profit, and intense competition was also a major factor.
Dollar General Corp stock fell after the Q2 results because it missed the expected Revenue by -1.55% and Earning Per Share by -4.98%. The discount retailer mainly slashed its sales and profit because the market focuses on low prices. Dollar General has been facing trouble for over a year due to weak consumer spending and workers protesting federal safety violations. Dollar General’s 60% of sales come from lower-income consumers.
“While middle and higher-income households are seeking value as well, they don’t claim to feel the same level of pressure as low-income households, as customers have felt more pressure on their spending,” said CEO Todd Vasos.
“While we believe the softer sales trends are partially attributable to a core customer who feels financially constrained, we know the importance of controlling what we can control. With the evolving retail and consumer landscape in mind, we are taking decisive action to further enhance our value and convenience offering, as well as the in-store experience for our associates and customers,” said CEO Todd Vasos.
The primary macroeconomic factors that affect Dollar General’s core customers include unemployment and underemployment rates, inflation, wage growth, changes in U.S. and global trade policy, and changes in U.S. government policy and assistance programs, such as the Supplemental Nutrition Assistance Program, unemployment benefits, and economic stimulus programs.”The heavier promotional environment in the second half of 2024, could have an impact our sales and margin results” said by the Dollar General Corp.
Dollar General Stock Q2 Highlights
- Net Sales: Net sales increased 4.2% to $10.21 billion driven primarily by new stores and a 0.5% increase in same-store sales. Average sales per square foot for all stores over the 52 weeks ended August 2, 2024, were $263.
- Gross profit, as a percentage of net sales: Gross profit, as a percentage of net sales, was 30.0% in the 2024 period and 31.1% in the 2023 period, a decrease of 112 basis points, primarily reflecting increased markdowns and damages, a greater proportion of sales coming from the consumables category and increased shrink.
- SG&A as a percentage of net sales: SG&A expense, as a percentage of net sales, was 24.6% in the 2024 period compared to 24.0% in the 2023 period, an increase of 57 basis points, primarily due to higher retail labor, depreciation and amortization, and store occupancy costs as a percentage of net sales.
- Operating Profit: Operating profit decreased 20.6% to $550.0 million in the 2024 period compared to $692.3 million in the 2023 period.
- Interest Expense: Interest expense, net decreased by $16.2 million in the 2024 period compared to the 2023 period primarily driven by higher cash balances.
- Tax Rate: The effective income tax rate for the 2024 period was 22.3% compared to a rate of 22.9% for the 2023 period primarily due to the effect of rate-impacting items on lower earnings before taxes.
- Net Income: Net income was $374.2 million, or $1.70 per diluted share, in the 2024 period compared to net income of $468.8 million, or $2.13 per diluted share, in the 2023 period.
DG Consolidated Q2 Highlights
- Balance Sheets: The total current assets increased from $8,413,979 to $8,724,242, total assets increased from $30,395,557 to $31,813,765, and total liabilities increased from $24,097,852 to $24,553,527 compared to last year.
- Income Statement: The net sales increased from $9,796,181 to $10,210,361, operating profit decreased from $692,314 to $549,962, net income decreased from $468,835
to $374,190, and EPS decreased from $2.14 to $ 1.70 compared to last year. (for the quarter ended) - Cash Flows: Net cash provided by operating activities increased from $726,721 to $1,652,729 and Cash and cash equivalents, end of the period increased from $353,018 to $1,222,691.
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