• Net Sales: Increased 4.5% to $10.3 billion in Q4.
• Fiscal Year Sales: Surpassed $40 billion for the first time in company history.
• Same-Store Sales: Increased 1.2% in Q4, driven by a 2.3% growth in average transaction amount.
• Gross Profit Margin: 29.4%, a decrease of 8 basis points.
• SG&A Expenses: 26.5% of sales, an increase of 294 basis points.
• Operating Profit: Decreased 49% to $294 million, impacted by $232 million in charges from portfolio review.
• EPS: Decreased 52.5% to $0.87, including a $0.81 negative impact from portfolio review charges.
• Inventory: $6.7 billion, a decrease of 4% year-over-year.
• Cash Flow from Operations: $3 billion in 2024, a 25% increase.
• Capital Expenditures: $1.3 billion in 2024.
• Store Closures: 96 Dollar General stores and 51 pOpshelf locations identified for closure.
• 2025 Guidance: Net sales growth of 3.4% to 4.4%, same-store sales growth of 1.2% to 2.2%, and EPS of $5.10 to $5.80.
• New Store Openings: 575 new stores planned in the U.S. for 2025.

• Warning! GuruFocus has detected 6 Warning Signs with DG.

Release Date: March 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Dollar General Corp (NYSE:DG) achieved a milestone by surpassing $40 billion in fiscal year sales for the first time in the company's history.
• Net sales increased by 4.5% to $10.3 billion in Q4 2024, demonstrating solid top-line growth.
• The company successfully grew market share in both consumable and non-consumable product sales during the fourth quarter.
• Dollar General Corp (NYSE:DG) reported a significant improvement in shrink, with a year-over-year improvement of 68 basis points in Q4.
• The company plans to open 575 new stores in the United States and expand its presence in Mexico with up to 15 new stores in 2025, indicating continued growth and expansion opportunities.

Negative Points

• Same-store sales growth was modest at 1.2% for the quarter, driven entirely by an increase in average transaction amount, while customer traffic declined by 1.1%.
• Operating profit for Q4 decreased by 49% to $294 million, impacted by $232 million in charges related to portfolio optimization.
• EPS for the quarter decreased by 52.5% to $0.87, largely due to the negative impact of portfolio review charges.
• The company closed 96 Dollar General stores and 45 pOpshelf stores as part of a portfolio optimization review, indicating challenges in certain locations.
• Dollar General Corp (NYSE:DG) anticipates continued economic pressure on its core customer base in 2025, with no expected improvement in the macro environment.

Q & A Highlights

Q: Your guidance today of getting to operating margin of 6% to 7% by 2028. Can you talk about what you expect the arc of the margin expansion to look like between now and then? What are the biggest structural changes preventing you from getting back to historical margins? A: Kelly Dilts, CFO, explained that the margin expansion won't be a straight line but will be driven by mature store comp sales and initiatives like shrink and damage control, private brands, and inventory optimization. The DG Media Network and non-consumable mix are also expected to contribute to margin improvement.

Q: Can you diagnose the consumer's behavior and spending patterns recently? A: Todd Vasos, CEO, noted that the core consumer remains financially strained but resourceful. The trade-down trend is back and seems to be accelerating. The company is monitoring tariffs and other economic factors closely.

Q: Could you recap learnings from your back-to-basics strategy in 2024? What incremental initiatives should we consider for 2025? A: Todd Vasos highlighted the success of shrink reduction and inventory optimization as key outcomes of the back-to-basics strategy. The focus for 2025 will be on productivity measures, SKU reduction, and optimizing distribution processes to enhance store efficiency.

Q: Beyond the existing store closures, are you expecting more closures based on your portfolio optimization? How do you compare the returns on new store openings, Project Elevate, and store remodels? A: Todd Vasos stated that while further closures are not planned, the company will continue to evaluate its portfolio. Kelly Dilts added that new store openings have an IRR of 17% with a two-year payback, and Project Elevate is expected to deliver a 3% to 5% sales lift.

Q: What is the latest on your store conditions versus expectations, and what opportunities do you see to further improve working capital? A: Todd Vasos reported that store conditions are improving, with 70% of stores meeting expectations. Inventory levels have been optimized, contributing to improved working capital. Kelly Dilts noted significant improvements in cash flow and plans to pay down debt early in 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.