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Report on Dollar General December 2000



(I'm doing this because technically the annual report is due for this, and
since Al said he's leaving, I thought I should at least present this since
this stock was bought at my urging.  I will also post a more current stock
analyzer on the web site.)
Report on Dollar General
December 17, 2000
TO:  HPD Investment Group
FR:  Nancy Montague
For  Dec meeting

1. (market price/share as of close of market, 12/15/00 - $17 7/16
Shares owned: 121 @ Market price:   $2109.94 [purchased 12/14/98]
Cost basis:    [ original price 16.5218 + $8 commission = ______
Percent gain:  5.12
(average annual return:  3.7%)

2. Research - 3 Strong Buy; 9 moderate buy   5

Excerpt from Quarterly report
December 11, 2000
DOLLAR GENERAL CORP (DG)
Quarterly Report (SEC form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
*****

RESULTS OF OPERATIONS
*****
The following text contains references to years 2000, 1999, 1998, and 1997
which represent fiscal years ending or ended February 2, 2001, January 28,
2000, January 29, 1999, and January 30, 1998, respectively. This discussion
and analysis should be read in conjunction with, and is qualified in its
entirety by, the consolidated financial statements and their notes thereto.

RESULTS OF OPERATIONS
The nature of the Company's business is seasonal. Historically, sales in the
fourth quarter have been significantly higher than sales achieved in each of
the first three quarters of the fiscal year. Thus, expenses, and to a
greater extent operating income, vary by quarter. Results of a period
shorter than a full year may not be indicative of results expected for the
entire year. Furthermore, comparing any period with a period other than the
same period of the previous year may reflect the seasonal nature of the
Company's business.
The Company defines same stores as those opened before the beginning of the
previous fiscal year which have remained open throughout the current period.

NINE MONTHS ENDED OCTOBER 27, 2000, AND OCTOBER 29, 1999
NET SALES. Net sales for the first nine months of 2000 increased $398.7
million, or 14.7%, to $3.1 billion from $2.7 billion for the comparable
period in 1999. Same-store sales increased 0.7% for the first nine months of
2000.
In the second quarter the Company undertook a major relay of its stores
while adding 600 new items to and deleting 800 items from the merchandise
assortment. The new prototype features wider aisles, additional selling
space for seasonal merchandise, and better customer flow through high
traffic departments. The Company also continued its installation of new
technology and ordering processes in all stores. In conjunction with
implementing this new ordering process, the Company experienced softer than
expected sales in some core categories as a result of low in-stocks. While
this aggressive implementation was disruptive to year-to-date results,
management believes these efforts position the stores for increased
productivity and profitability in the future.
GROSS PROFIT. Gross profit for the first nine months of 2000 was $876.0
million, or 28.2% of net sales, compared with $753.4 million, or 27.8% of
net sales, in the same period last year. This increase was driven by higher
purchase markup and lower shrink, which offsets higher distribution expenses
in the period. Year-to-date, transportation expense is slightly lower as a
percentage of sales, despite higher fuel costs. This improvement is a result
of better fleet utilization, continued benefits from our transportation
management system, and lower average stem miles.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSE. SG&A expense for the
first nine months of 2000 totaled $654.4 million, or 21.0% of net sales,
compared with $546.2 million, or 20.2% of net sales during the comparable
period last year. Although expenses were below plan for the period, lower
than expected sales eliminated SG&A expense leverage. [repeat some of
explanation in 3 month section?]
INTEREST EXPENSE. Interest expense increased to $10.5 million, or 0.34% of
sales, compared with $5.1 million, or 0.19%, in the comparable nine-month
period last year. This increase is primarily a result of higher average
borrowings and an increase in weighted average interest rates compared with
the same nine-month period last year. Average borrowings were higher than
last year due to capital expenditures for new stores and distribution
centers, inventory for new stores and the timing of share repurchases.
PROVISIONS FOR TAXES ON INCOME. The effective income tax rate was 36.25% for
the nine-month periods ended October 27, 2000, and October 29,1999.

THREE MONTHS ENDED OCTOBER 27, 2000, AND OCTOBER 29, 1999
NET SALES. Net sales for the quarter increased $143.9 million, or 15.1%, to
$1,094.4 million from $950.4 million for the comparable period in 1999. Same
store sales for the third quarter increased 0.8%. Sales in the third quarter
were driven by a 24.4% increase in sales of highly consumable merchandise, a
9.8% increase in sales of basic clothing merchandise, and a 7.5% increase in
sales of hardware and seasonal merchandise. Although the Company experienced
softer than expected sales in some core categories as a result of low
in-stocks, the Company had better than expected sales in other departments
including food, toys, Halloween, and summer seasonal merchandise.
GROSS PROFIT. Gross profit for the quarter was $321.4 million, or 29.4% of
net sales, compared with $277.9 million, or 29.2% of net sales, in the same
period last year. This increase was primarily the result of higher purchase
markup, lower shrink, and lower transportation expense as a percentage of
sales. However, these improvements were slightly offset by higher markdowns
in the period.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSE. SG&A expense for the
quarter totaled $236.5 million, or 21.6% of net sales, compared with $195.8
million, or 20.6% of net sales during the comparable period last year. SG&A
expense as a percentage of sales increased primarily as a result of higher
health insurance expense, rent expense, and payroll expense.
INTEREST EXPENSE. Interest expense increased to $4.9 million, or 0.44% of
sales, from $2.3 million, or 0.24% of sales, in the comparable period last
year. This increase was a result of higher average borrowings and an
increase in weighted average interest rates compared to the same three-month
period last year. Average borrowings were higher than last year due to
capital expenditures for new stores and distribution centers, inventory for
new stores and the timing of share repurchases.