Challenges during the period were primarily attributed to increased shrink, lower inventory markups, and increased markdowns. Credit: Jonathan Weiss via Shutterstock.

Dollar General Corporation has released its financial results for the third quarter (Q3) of financial year 2023. The report reveals a mixed performance in key areas, indicating challenges that the company aims to address moving forward.

In the third quarter of 2023, Dollar General reported a 2.4% increase in net sales, reaching $9.7bn. However, same-store sales experienced a 1.3% decline, with notable drops in the home, seasonal, apparel, and consumable categories.

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Operating profit also decreased significantly by 41.1% to $433.5m, contributing to a diluted earnings per share (EPS) decrease of 45.9% to $1.26.

Factors impacting results: understanding the challenges

Several factors contributed to the financial results. Gross profit as a percentage of net sales declined to 29.0% in Q3 2023, primarily due to increased shrink, lower inventory markups, and increased markdowns.

Selling, general and administrative expenses rose to 24.5% of net sales, driven by various expenses, including retail labour and rent. Interest expense increased by 53.3%, reaching $82.3m, primarily due to higher average borrowings and interest rates.

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Future plans and real estate growth: financial year 2024 outlook

Despite the challenges faced in Q3 2023, Dollar General remains optimistic about its future.

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The company plans to execute approximately 2,385 real estate projects in financial year 2024, including 800 new store openings, 1,500 remodels, and 85 store relocations.

This represents a modest slowdown compared to recent years, reflecting a strategic response to the current business environment. The company believes these projects will not only serve both new and existing customers but also drive strong financial returns, laying the foundation for future growth.

Looking ahead: financial year 2023 guidance

For the remainder of financial year 2023, Dollar General maintains its financial guidance, anticipating net sales growth in the range of 1.5% to 2.5%, a same-store sales decline of approximately 1.0% to flat, and diluted EPS in the range of approximately $7.10 to $7.60.

The guidance acknowledges potential impacts from financial year’s (2022) 53rd week and higher interest expenses experienced in 2023.