Dollar General CEO Todd Vasos credited a third round of government stimulus checks with enhancing the company's sales performance in the first quarter.
Dollar General raised its fiscal 2021 profit forecast as stimulus checks prompted consumers to spend more on home goods.
For the first quarter ended April 30, net sales decreased 0.6% to $8.4 billion at the discounter. Same-store sales decreased 4.6% but increased 17.1% on a two-year stack basis. The net sales decrease was primarily driven by a decline in same-store sales, as well as the impact of store closures, partially offset by positive sales contributions from new stores. The comp decrease was driven by a decline in customer traffic, partially offset by an increase in average transaction amount. Dollar General said it believes consumer behavior driven by government stimulus payments had a significant positive effect on sales in its non-consumable product categories.
Operating profit increased 4.9% to $908.9 million. The company reported net income of $677.7 million, an increase of 4.2%. And diluted EPS increased 10.2% to $2.82. The fast-growing chain now expects fiscal 2021 earnings per share between $9.50 and $10.20, compared with its prior range of between $8.80 and $9.50.
Dollar General also expects its fiscal 2021 net sales to increase by up to 1%, compared with its prior range of a flat-to-2% decline.
“We are pleased with our strong start to fiscal 2021, and I want to thank our associates for their unwavering commitment to supporting our customers, communities, and each other,” Vasos said. “As a testament to their efforts, our first-quarter results exceeded our expectations, reflecting strong underlying performance across the business, which we believe was enhanced by the most recent round of government stimulus payment. Given our first-quarter outperformance, we are raising our financial outlook for fiscal 2021.”
The first quarter of 2020 included approximately $80 million of incremental investments the company made in response to the COVID-19 pandemic, primarily driven by $60 million in frontline employee appreciation bonuses, as well as measures taken to further protect the health and safety of employees and customers.
In April, Dollar General announced it is planning to hire as many as 20,000 new employees this spring as it looks to open at least 1,050 stores this year and operate more than 18,000 stores in the United States by the end of 2021. Dollar General employs more than 158,000 workers; this new hiring push will grow Dollar General's workforce by 13%.
The company’s plans for 2021 include continued expansion and expectations that sales growth is unlikely given comparison against 2021’s incredibly strong results. Dollar General affirmed plans to execute 2,900 real estate projects, including 1,050 new store openings, 1,750 store remodels and 100 store relocations. That compares to 1,000 new stores, 1,670 remodels and 110 relocations in 2020. That number includes up to 3,000 pOpshelf stores.
“As a rapidly-growing company, we are proud to provide individuals with opportunities to start or advance their careers while serving as a positive economic presence in each community we call home,” said Kathy Reardon, Dollar General’s EVP and chief people officer. The power of coupling our mission of Serving Others with one of our key operating priorities, investing in our diverse teams through development, empowerment and inclusion, makes DG an employer of choice, and we look forward to welcoming new employees to come grow with our DG family this spring.”
During the first quarter, total additions to property and equipment in the first quarter of 2021 were $278 million, including approximately: $126 million for improvements, upgrades, remodels and relocations of existing stores; $74 million for store facilities, primarily for leasehold improvements as well as fixtures and equipment in new stores; $66 million for distribution and transportation related projects; and $11 million for information systems upgrades and technology-related projects. During the first quarter of 2021, the company opened 260 new stores, remodeled 543 stores and relocated 33 stores.
In addition, the company continues to expect capital expenditures, including those related to investments in the company’s strategic initiatives, in the range of $1.05 billion to $1.15 billion.
“During the first quarter, we executed more than 800 real estate projects, including new store openings in our pOpshelf and larger footprint Dollar General formats," said Vasos. "In addition, we remained focused on serving our customers, while further advancing our key strategic initiatives. Looking ahead, we are excited about our plans and believe we are well-positioned to continue delivering long-term sustainable growth and value for our shareholders.”
Goodlettsville, Tennessee-based Dollar General operates more than 17,400 stores in 46 states, employing approximately 140,000 associates. The company is No. 15 on The PG 100, Progressive Grocer’s 2021 list of the top food and consumables retailers in North America.