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GOODLETTSVILLE, Tn. -- Dollar store operator Dollar General Corp. yesterday posted higher-than-expected second-quarter earnings, thanks in part to a 12.5 percent increase in sales of products that include food.
The retailer's stock price moved up 4.34 percent on the news, closing at $19.48 yesterday on the New York Stock Exchange.
Dollar General, which operates 7,712 neighborhood stores including 30 grocery/general merchandise stores called Dollar General Markets, reported net income of $75.6 million, or $0.23 per share for the quarter ended July 29, 2005, compared to net income of $71.3 million, or $0.22 per share, in the previous fiscal second quarter.
Net sales were $2.07 billion, a 12.5 percent increase over net sales of $1.84 billion for the same period of fiscal 2004. The increase was primarily a result of 633 net new stores, and a same-store sales increase of 3.9 percent, the company said.
As a percentage of sales, gross profit for the quarter declined to 28.6 percent, from 29.2 percent for the comparable period in fiscal 2004. Dollar General cited lower sales of home products, basic clothing, and seasonal categories; higher transportation costs; and increased inventory markdowns taken in connection with the company's per-store inventory reduction initiatives among the reasons for the decrease.
Dollar General estimated that its August same-store sales are in the range of 0.5 percent to 1.0 percent. The company said consumer discretionary spending has been greatly impacted in August, due to the combination of fuel prices and aggressive back-to-school marketing and discounted pricing by competitors. Same-store sales are currently estimated to be in the range of one percent to three percent for the third quarter and in the range of two percent to four percent for the fourth quarter.