Per-share profits jumped 29% at Dollar General ( DG) in its first quarter, topping analysts' estimates.

The discount store chain earned $60.3 million, or 18 cents a share, in its quarter ended May 2. In the year-ago quarter, Dollar General earned $45.9 million, or 14 cents a share.

Revenue at the Goodlettsville, Tenn.-based company increased 12.9% to $1.57 billion.

Excluding restatement expenses, Dollar General would have earned $60.5 million, or 18 cents a share, up 20% on a per-share basis from last year (which was also restated).

Wall Street analysts surveyed by Thomson First Call were expecting Dollar General to earn 16 cents a share on $1.57 billion in sales. The company didn't give specific first-quarter guidance, saying only that it expected its 2003 earnings to increase 11% to 15%, excluding restatement items, on a 13% to 15% jump in revenue.

Dollar General reiterated that guidance on Thursday.

Sales were toward the low end of the company's projections. On a same-store basis, which compares results of like outlets open more than one year, Dollar General's sales increased 4.2%. The company has projected growth in comparable-store sales of 4% to 6% for the year.

Strong sales of seasonal items, which grew at a 15.8% clip over the same quarter last year, helped drive same-store sales growth, company officials said on a conference call. Slow apparel sales, which increased at a 0.1% rate, helped prevent the company's overall sales growth from rising faster.

The biggest boost to Dollar General's bottom line came from an improvement in its gross profit margin. Gross margin, which is the difference between what a company charges customers for its products and what it pays suppliers for them, increased 18.8% in the quarter to $451.9 million. As a portion of sales, gross margin jumped 1.43 percentage points to 28.8%.

Company officials attributed the increase in gross margin to higher average markups on products and lower rates of damaged goods in Dollar General stores. The company benefited from sales of higher-margin seasonal items in the quarter and increased its direct imports of lower cost goods, company officials said.

Although the company's gross margin improvement exceeded its internal projections, company officials said they still had work to do. The company expects to give back some of the improvement it saw in the first quarter because it doesn't expect to sell as many seasonal items in the second quarter. Meanwhile, shrink, or lost inventory, is still higher than the company's plan, officials said.

"Shrink is an area about which we feel very strongly. It's one of our highest priorities," said David Perdue, Dollar General's chief executive officer, on the call. "But it's still at a level that's unacceptable."

Operating expenses also hurt the company in the quarter. Overall, sales, general and administrative expenses increased 17.4% in the quarter to $349 million. As a portion of sales, such expenses increased 80 basis points to 22.2%.

But the poor trend in operating expenses would have been worse if the company's restatement expenses were excluded. The company, which is being investigated by the Securities and Exchange Commission, had $300,000 of restatement expenses in the first quarter, compared with $5.3 million in such costs in the year-ago period. Excluding those costs, Dollar General's operating expenses increased 120 basis points to 22.2% of sales.

Company officials blamed the increase in operating costs on a wide range of factors at its stores, including increases in labor, utilities, maintenance and occupancy costs. Utility and maintenance costs, for instance, increased in part because bad weather in the quarter led to increased heating and snow removal expenses, they said.

"It was a little bit like death by a thousand cuts," said Jim Hagan, Dollar General's chief financial officer.

Hagan said there was little new to report on the SEC's investigation into circumstances that led to Dollar General's restatement of its 1998, 1999 and 2000 earnings. The company has provided all of the information that the regulatory body has asked for to date, Hagan said.

"At this point, we're awaiting word from the SEC," he said.