Earnings fell to $45.5 million, or 15 cents per share, in the quarter ended Aug. 4, down from $75.6 million, or 23 cents per share, for the same quarter a year earlier. Sales for the period were up 9%, rising to $2.25 billion. Sales at stores open at least a year, rose 3.2% during the quarter. August same-store sales were up 4.8% while total sales for the month increased 10.1% to $687.2 million, Dollar General said.
Gross profit for the quarter was $611.53 million, up from $591.53 million in the prior year period. Increased advertising, utility and store occupancy costs along with administrative salaries and stock option expenses rose to $530.96 million for the quarter, up from $470.46 a year ago.
The Goodlettsville, TN-based retailer said it would not provide a third quarter earnings forecast and withdrew its full-year outlook, issued in March, in which it estimated earnings of $1.14 to $1.21 per share.
Dollar General, which operates 8,178 stores and expects to add at least 825 stores this fiscal year, said fierce competition and a cutback in discretionary spending by consumers affected by higher gas prices and energy rates, was adding to the uncertainty about its future outlook.
"We knew the quarter would be challenging going in," David Purdue, Dollar General's president and chief executive officer, said in a conference call. Purdue said despite that challenging outlook, comparative store sales in the last five months have been encouraging, especially in newer markets where same store sales have surpassed the chain average.
Purdue said the company was also evaluating its real estate strategy and may reconsider how it identifies stores for closing, relocation and remodeling. In addition, he said the firm was reviewing inventory controls after merchandise inventory increased 18.8% in the second quarter, rising to $1.7 billion from $1.5 billion a year earlier. Company officials said they were evaluating whether to "aggressively sell" that excess merchandise, presumably at a steep discount that could hurt gross margins.
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