Dollar General Tops Views Amid Continued Sales Improvement

Dollar General Corp. on Thursday posted earnings for the most recent quarter well above market views as sales at the discount retailer continued to climb and margins improved.

Shares in the company added 3.4% to $87 in light premarket trading.

During the quarter, same-store sales rose 2.2%, helped by increases in both customer traffic and average transaction amount.

The sales improvement marks a departure from other, higher-priced retailers reporting a disappointing start to the year. Chains from J.C. Penney Co. to Target Corp. posted sluggish sales as consumers cut back spending. Years after the global financial crisis, Dollar General still finds itself picking up more customers drawn to lower prices for smaller-size items that are sold closer to their homes.

"We remained keenly focused on ensuring the effectiveness and efficiency of every aspect of our business" as the company cut costs and improved its margins, said Chief Executive Todd Vasos. "We are confident in our opportunities for growth."

In all, Dollar General posted a profit of $295.1 million, or $1.03 a share, up from $253.2 million, or 84 cents a share, a year earlier. Sales grew 7% to $5.27 billion.

Analysts polled by Thomson Reuters had projected earnings of 95 cents a share on revenue of $5.28 billion.

Gross margin rose to 30.63% from 30.47%, mostly owing to higher initial inventory markups and cheaper fuel for transportation. Overhead expenses as a percentage of sales narrowed to 21.5% versus 21.8% in the quarter a year ago.

Write to Anne Steele at [e-mail]

(END) Dow Jones Newswires

May 26, 2016 08:25 ET (12:25 GMT)

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