Higher store investments to hit Dollar General profit, shares fall 10 pct
(Adds details from conf. call, CEO comment; updates shares)
By Uday Sampath Kumar
March 14 (Reuters) - Dollar General Corp will plough
back a part of its 2019 profit to revamp its supply chain and
add self-checkout lanes at its stores as it competes with online
grocers and U.S. chains Walmart Inc and Kroger Co
Shares of the discount retailer fell nearly 10 percent on
Thursday after it projected full-year profit below analysts'
expectations and said it would spend $50 million for the
The company, which operates more than 15,000 stores in the
United States, said it would open 975 new stores and remodel
1,000 old ones. The upgrades would include introducing
self-checkout lanes and tweaking its shelf stocking process to
make it faster.
Dollar General also said by the end of fiscal 2019 it aims to
become its own distributor of fresh and frozen foods to as many
as 5,000 stores in a bid to rein in costs and offer more private
"We have some distribution voids quite frankly, across the
country.... By taking it in-house, we believe it will simplify
our network and be able to execute that much better," Chief
Executive Officer Todd Vasos said in an earnings call.
While these steps would pressure earnings this year, Dollar
General said it would lead to cost savings as early as 2020.
To pull in more customers, Dollar General will start its
own click-and-collect service later this year and also launch
its private label baby product and cosmetics brands.
Dollar General said it expects to earn $6.30 to $6.50 per
share in fiscal 2019, below the average analyst estimate of
$6.65, according to IBES data from Refinitiv.
Excluding items, the company earned $1.84 per share in the
fourth quarter ended Feb. 1 but missed the average analyst
estimate of $1.88, blaming on higher transportation cost and
lower sales of high-margin products.
However, the company's same-store sales rose 4 percent and
beat the 2.6 percent increase analysts had estimated, as its
customers, who benefited from an earlier-than-usual distribution
of food stamps, spent more on groceries.
Net sales rose 8.5 percent to $6.65 billion and beat
analysts' expectations of $6.61 billion.
Rival Dollar Tree Inc's shares were down 1.31
percent. The company last week reported better-than-expected
same-store sales, but wrote down the value of its Family Dollar
chain by $2.7 billion after years of stagnating sales.
(Reporting by Uday Sampath in Bengaluru; Editing by Arun
First Published: 2019-03-14 13:02:28
Updated 2019-03-14 18:18:32
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