Dollar General fined tuned its full year sales and profit forecast following better than expected third quarter results that also flashed a few warning signs.
Third quarter same store sales at Dollar General increased 4% thanks to a blend of increased customer traffic and average transaction size while earnings per share of 62 cents were two cents better than analysts forecast. Total sales increased 10.3% to nearly $4 billion and profits increased 21.6% to $208 million. The store base swelled to 10,371 units as the company has opened 479 stores so far this year and is on track to open approximately 625 stores followed by 635 new units next year.
Dollar General chairman and CEO Rick Dreiling characterized the performance as solid, even through it wasn’t solid enough to bring the company’s full year profit outlook up to the level forecast by analysts.
"Dollar General delivered another solid quarter, and we expect to continue building on our strong track record of success," said Rick Dreiling, chairman and CEO. "Our same-store sales increased 4%, on top of a 6.3% improvement in the third quarter of 2011 for a two-year stack of 10.3%. We had great financial performance across key metrics. Based on these results, we are now forecasting our full year adjusted earnings per share to be in the range of $2.82 to $2.85."
The upper end of that range remains a penny below analysts’ consensus estimate as the company simply brought up the bottom end of the range from $2.77 to $2.82. The same was true of the comp forecast. Dollar General tightened its full year comp forecast to a range of 4.5% to 5%, despite forecasting a fourth quarter increase in the range of 3% to 4%. The company had previously said its full year comps would increase in the range of 3% to 5%, but that range was narrowed to 4% to 5% when second quarter results were announced in early September.
While the 4% third quarter increase was within the company’s narrowed forecast range, it was well below the prior year increase of 6.3% and also marked a sequential deceleration from the 5.1% comp increase in the second quarter. A similar situation is shaping up for the fourth quarter where Dollar General’s forecast range represent further sequential deceleration and is well below the prior year’s fourth quarter comp increase of 6.5%.
The company’s sales continue to be driven by growth in consumables with t