Dollar General drives profits up

By Don Hogsett -- Home Textiles Today, 9/16/2002 12:00:00 AM

GOODLETTSVILLE, TN —

With consumers increasingly pinching pennies in an uncertain economy and a softening job market, Dollar General Corp. drove its second-quarter profits up a heady 56.3 percent, to $42.4 million from $27.1 million last year.

Sales at the chain of neighborhood stores climbed by 18.6 percent, to $1.5 billion from $1.2 billion last year. Easily beating out its higher-priced peers in U.S. retailing, same-store sales climbed higher by 9.6 percent.

As sticker-shocked consumers seek out lower-priced alternatives, the number of same-store customer transactions increased by 7.6 percent in the quarter, easily besting a 4.5 percent increase put up the year before.

Sales in each of the company's product categories climbed at a double-digit pace, led by hardware and seasonal with a 22.3 percent gain; followed by consumables, 21.0 percent; basic clothing, 11.8 percent; and home products, 10.0 percent.

Lifting the bottom line, in addition to stronger sales, the retailer hacked away at overhead, reducing costs, to 90 basis points, to 21.6 percent of sales from 22.5 percent the prior year. Average gross margin narrowed somewhat, by 30 basis points, to 26.7 percent from 27.0 percent of sales. But given the big increase in sales, gross margin dollars shot up by 16.9 percent, to $73.8 million from $55.2 million a year ago.

Further boosting profits, the retailer pruned its interest costs by 5.2 percent, to $11.3 million from $12.0 million, generating a cash savings of $620,000.

Dollar General Corp.