Dollar General, the discount retailer, reported a decline in profit for the third quarter. Despite a rise in sales and customer traffic, the company's profit fell to $276.2 million compared to $526.2 million in the same quarter last year. However, the earnings per share of $1.26 were higher than analyst projections of $1.17 per share.
Sales Increase and Factors Influencing It
The company witnessed a 2.4% increase in sales, reaching $9.69 billion, surpassing the analyst forecasts of $9.63 billion. This growth was primarily driven by new store openings. However, it was partially offset by store closures and a 1.3% decrease in same-store sales, which considers store openings and closures. The decline in same-store sales was attributed to lower average transaction amounts.
Factors Impacting Gross Margin Rate
The gross margin rate declined during the quarter due to several factors including increased inventory shrink, higher markdowns, and lower inventory markups. Additionally, overhead costs as a percentage of sales increased due to various factors such as higher retail labor, depreciation and amortization expenses, repairs and maintenance costs, rent, and card transaction fees.
Chief Executive Todd Vasos acknowledged that the company is not satisfied with its third-quarter results, which were affected by inventory shrinkage. However, he highlighted positive signs such as increased customer traffic and market share gains in both dollars and units.