Dollar General ( DG) fell in early trading Monday as the company disclosed a $10 million fine to settle SEC accounting allegations and worse-than-expected fourth-quarter earnings. The company also said its CFO quit. Dollar General said it will pay $10 million to settle allegations stemming from accounting problems that led it to a massive earnings restatement in early 2002. The company also agreed to a permanent injunction against future securities violations, a standard provision that stiffens the penalty for future transgressions. The fine drove down fourth-quarter net income to $102.8 million, or 30 cents a share, from $108.1 million, or 32 cents a share, a year ago. Excluding the fine, net income increased 3.4% to $113 million, or 33 cents a share, compared with $109.3 million, or 33 cents a share, in the prior-year period. On this basis, however, analysts had been calling for 34 cents a share. The shares were recently down $1.26, or 6.2%, to $18.86. Total quarterly sales increased 12% to $1.97 billion, the company said, citing a 3.3% increase in quarterly same-store sales and the addition of 587 new stores.
Dollar General said gross profit was 29.3% of sales at $576.5 million, which was down slightly from the prior year's gross profit, which was 30% of sales. The company cited lower purchase markups and increased markdowns on Christmas merchandise and other discontinued or slower-moving items. Excluding charges, Dollar General sees 2004 earnings up 10% to 14%, but cautioned that "because of our initiatives, 2004 could be a year when earnings are difficult to predict for Dollar General." Analysts expect $1.07 a share in the year. The company earned 92 cents a share in 2003. Dollar General expects capital expenditures of $300 million in 2004, including 675 new stores. Separately, the company said CFO James J. Hagen resigned and that he "will be leaving the company after a reasonable transition period." Hagen joined the company in 2001. The company was forced to restate its earnings in early 2002 because of inaccurate accounting for leases and tax liabilities.