Retail
Dollar General Cuts Outlook Slightly, Still Committed to Family Dollar Acquisition
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The company said that same-store sales rose 2.1% in the second quarter, driven by “significant growth” in sales of consumable items like tobacco, perishables, and candy and snacks. Both store traffic and average transaction amounts increased in the quarter. Total sales rose 7.5% year-over-year.
The big news for Dollar General, of course, is the bloody nose the company got when Family Dollar Stores Inc. (NYSE: FDO) rejected its all-cash $78.50-per-share bid in favor of a $74.50 per share cash-and-stock deal from Dollar Tree Inc. (NASDAQ: DLTR). In the company’s earnings release today CEO Rick Dreiling said, “[W]e remain firmly committed to the acquisition.” Family Dollar Stores rejected Dollar General’s offer just last week, saying that the combination would be unlikely to pass antitrust regulators.
In its outlook statement, Dollar General reiterated its guidance for full-year 2014 sales to rise 8% to 9% above the 2013 total. The same-store sales forecast is expected to rise by 3.0% to 3.5%, a drop of 0.5% from the top end. Adjusted diluted EPS continues to be forecast at $3.45 to $3.55. The company repurchased $800 million worth of its common stock in the first quarter and none in the second quarter. Dollar General said that it has suspended its buyback program until the proposed transaction with Family Dollar is finally decided.
The consensus analysts’ estimates call for third-quarter EPS of $0.81 on revenues of $4.77 billion.
The company also reiterated its plans to open 700 new stores in the 2014 fiscal year and to remodel or relocate another 500. Dollar General opened 650 new stores in 2013 and remodeled or relocated 582 stores.
The company’s CEO said:
Our second quarter same-store sales began very strong with a year over year increase in May of more than 3.5 percent; however, this growth moderated as we moved through June and July given the competitive environment and a consumer who, although resilient in the face of economic uncertainty, remains cautious with her spending. As we enter the third quarter, we are seeing our sales momentum pick back up and expect that momentum to build as our initiatives gain traction with our customers.
Shares were down about 1.1% in premarket trading Thursday to $63.00, in a 52-week range of $53.00 to $65.99. Thomson Reuters had a consensus analyst price target of around $69.40 before the results were announced.
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