Home Lags at Dollar General

By Don Hogsett -- Home Textiles Today, 3/27/2006 12:00:00 AM

Goodlettsville, Tenn. —

Fourth-quarter profits at Dollar General Corp. rose 8.5% to $145.3 million from $133.9 million last year, mostly due to new store openings and an extra week of sales.

The retailer said business during the all-important Christmas quarter was stymied by continued economic pressures on its core lower and fixed-income customers and “continued and aggressive marketing and promotional activities of other retailers.” In addition, the retailer said sales “were negatively impacted by initiatives to lower levels of older inventory, particularly in the seasonal, home and apparel categories.”

With fewer goods to move, sales of home products grew by 6.3% in the period, to $269.3 million, far behind the blazing pace of consumables, which jumped up by 18.2%, to $1.5 billion. Still, that was a better performance than home goods scored for the entire year, with sales rising by 3.2%, to $907.8 million.

Sales at the low-cost retailer improved by 12.9%, to $2.5 billion from $2.2 billion last year. But that's where the good news stopped, as same-store sales at the neighborhood retail chain fell by 1.6%, hampered by inventory issues, and thinned margins.

Taking a bite out of the bottom line, average gross margin thinned by 50 basis points, or half a percentage point, to 29.5% from 30.0% a year ago. Operating costs ticked up slightly, to 20.1% of sales from 20.0% last year.

Interest expense climbed by 5.2%, to $7.6 million from $7.2 million last year, but was offset by a jump in interest income, which shot up by 38.7%, to $2.6 million from $1.8 million the prior year.

Dollar General Corp.