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Dollar General Corporation Reports Record Third Quarter 2012 Sales And Earnings

Operating profit increased by 16 percent to 9.1 percent of sales in the 2012 third quarter, compared to 8.6 percent of sales in the 2011 third quarter.

Gross profit, as a percentage of sales, was 30.9 percent in the 2012 third quarter compared to 31.0 percent in the 2011 third quarter. The most significant factors positively affecting the gross profit rate in the 2012 quarter were higher inventory markups, the impact of a significant LIFO charge in the 2011 period ($11 million) that did not reoccur in the 2012 period and transportation efficiencies. The most significant factors negatively affecting the gross profit rate included higher markdowns, a lesser impact from price increases compared to the prior year, a heavier consumables weighting within the sales mix and a higher shrink rate.

Selling, general and administrative expenses (SG&A), as a percentage of sales, was 21.8 percent in the 2012 third quarter compared to 22.4 percent in the 2011 third quarter, an improvement of 58 basis points. Retail labor expense increased at a rate lower than the increase in sales, partially due to ongoing benefits of the Company’s workforce management system. A decrease in incentive compensation also contributed to the overall decrease in SG&A as a percentage of sales, and workers’ compensation and general liability expenses increased at a rate lower than the increase in sales. SG&A results for the 2012 quarter also benefitted from other cost reduction and productivity initiatives as well as the 10.3 percent increase in sales. Costs that increased at a rate higher than the sales increase include fees associated with increased debit card usage.

Interest expense was $28 million in the 2012 third quarter compared to $39 million in the 2011 third quarter. The decrease was primarily due to lower all-in interest rates.

Other (income) expense in the 2012 third quarter includes $1.7 million of debt amendment fees which were reimbursed by Buck Holdings, L.P. The reimbursement was accounted for as a capital contribution in the third quarter.

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