Selling, general and administrative expenses impacted Dollar General’s third quarter results.
In the fiscal 2016 third quarter ended October 28, Dollar General Corp. recorded net income of $235.3 million, or 84 cents per diluted share, versus $253.3 million, or 86 cents per diluted share, in the period a year prior.
Comparable store sales decreased 0.1% from the 2015 third quarter, Dollar General maintained, primarily due to a decline in traffic partially offset by a gain in average transaction amount. Comps in the consumables category were positive, but the seasonal, apparel and home products categories dragged, the company reported.
Dollar General posted a net sales increase of 5% to $5.32 billion versus last year’s quarter. The net sales increase derived from new store revenue partially offset by the result of unit closings. Operating profit was $393 million versus $423.9 million in the year-earlier quarter.
Selling, general and administrative expenses in the quarter increased by about $80 million. As contributing factors to the higher SG&A expense, Dollar General cited increased retail labor and occupancy costs as well as charges of $13 million associated with the acquisition of the former Walmart Express store locations and expenses related to the closure of existing stores, $11 million of which was for lease termination and other exit and disposal outlays. In addition, Dollar General experienced an increase in disaster-related expenses of $7.7 million, most of which were hurricane related, the company noted. The 2015 period also included expenses of $6.1 million for severance-related benefit costs associated with a corporate restructuring.
“The challenging retail environment that we experienced in the 2016 second quarter continued into the third quarter, contributing to weakness in our same-store sales and our financial performance,” said Todd Vasos, Dollar General CEO. “In the 2016 third quarter, we invested in gross margin with the goal of driving traffic and sales over time. Many of these actions are gaining traction with our core customers, and we are encouraged by the early results. As expected, the full benefit on our same-store sales will not be immediate. We saw an acceleration in headwinds from average unit retail price deflation and reductions in SNAP benefits in the 2016 third quarter as compared to the 2016 second quarter. We are focused on efforts to drive traffic in our stores and to control the factors we can control as we look to overcome the issues impacting our results, many of which we believe are macroeconomic and transitory in nature.”
Dollar General operates 13,205 stores in 43 states.
