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Dollar General   Net sales increased 13.7 percent

Dollar General Q4 net income $414 million

Dollar GeneralDollar General Corporation reported financial results for its fiscal 2016 fourth quarter ended February 3, 2017.

The company's net income and diluted EPS for the 2016 fourth quarter were $414 million and $1.49, respectively, compared to net income and diluted EPS of $376 million and $1.30, respectively, in the 2015 fourth quarter.

READ MORE Dollar Tree Q2 net sales increased 48.3% to $3.01 billion

Net sales increased 13.7 percent to $6.0 billion in the 2016 fourth quarter compared to $5.3 billion in the 2015 fourth quarter. Net sales for the 53rd week of 2016 were $398.7 million.

Same-store sales increased 1.0 percent from the 2015 fourth quarter primarily due to an increase in average transaction amount, partially offset by a slight decline in traffic that moderated from the second and third quarters.

Same-store sales were driven by positive results in the consumables and home products categories, partially offset by negative results in the seasonal and apparel categories.

The net sales increase was positively affected by sales from new stores, modestly offset by sales from closed stores.

The company's gross profit, as a percentage of sales, was 31.6 percent in the 2016 fourth quarter compared to 31.8 percent in the 2015 fourth quarter, a decrease of 19 basis points.

The gross profit rate decrease was primarily attributable to higher markdowns, driven mainly by promotional activities and inventory clearance, and a greater proportion of sales of consumables. Partially offsetting these items were higher initial inventory markups.

Selling, general and administrative expenses (SG&A) were $1.22 billion in the 2016 fourth quarter, compared to $1.07 billion in the 2015 fourth quarter, an increase of 6 basis points as a percentage of sales.

The SG&A increase was primarily attributable to increased retail labor costs which increased at a rate greater than the increase in net sales.

Partially offsetting these costs were a reduction in incentive compensation expenses and administrative payroll costs which were essentially unchanged.

In addition, during the fourth quarter of 2016, the company recorded a reduction in SG&A of $4.5 million due to the sale or assignment of leases for 12 store locations that previously were closed in connection with the acquisition of former Walmart Express store locations.

The effective income tax rate in the 2016 fourth quarter was 36.8 percent compared to 36.1 percent in the 2015 fourth quarter.

The effective income tax rate for the 2016 fourth quarter was higher than the 2015 quarter due primarily to the one-time benefit recorded in the 2015 fourth quarter related to the retroactive extension of federal jobs tax credit programs to the 2015 tax year (principally the Work Opportunity Tax Credit).

For the first time in several years, these tax credits were not retroactively renewed in the company's fourth quarter but instead were available throughout fiscal 2016 and thus already reflected in the company's income tax rate for the first three quarters of fiscal 2016.

Full year 2016 financial results

Full year 2016 net sales increased 7.9 percent to $22.0 billion compared to net sales of $20.4 billion in 2015.

Same-store sales increased 0.9 percent, primarily due to an increase in average transaction amount accompanied by traffic that was essentially unchanged as compared to the prior year.

Same-store sales were driven by positive results in the consumables and home products categories partially offset by negative results in the apparel and seasonal categories.

The company's gross profit rate was 30.8 percent of sales in 2016 compared to 31.0 percent in 2015, a decrease of 11 basis points.

The gross profit rate decrease was primarily attributable to higher markdowns, driven mainly by promotional activities and inventory clearance, a greater proportion of sales of consumables, and increased inventory shrink, partially offset by higher initial inventory markups and lower transportation costs.

Full year SG&A was 21.5 percent of sales in 2016 compared to 21.4 percent in 2015, an increase of 3 basis points.

The SG&A increase was primarily attributable to retail labor costs which increased at a rate greater than the increase in net sales, partially offset by reductions in administrative payroll costs, incentive compensation expenses and advertising costs. The 2016 results also reflect an increase in disaster-related expenses of $12.2 million over 2015, much of which was hurricane-related.

The effective income tax rate for 2016 was 36.3 percent compared to a rate of 37.1 percent for 2015.

The effective income tax rate was lower in 2016 due to the adoption of an amended accounting standard related to employee share-based payments requiring the recognition of excess tax benefits in the income statement rather than in the balance sheet, as reported in prior years.

The company reported net income of $1.25 billion, or diluted EPS of $4.43, for fiscal year 2016 compared to net income of $1.17 billion, or diluted EPS of $3.95, for fiscal year 2015, an increase in diluted EPS of 12.2 percent.

The increase in diluted EPS includes an estimated impact of the 53rd week of approximately two percentage points.




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