Dollar General sees 3Q profit gain

Don Hogsett, January 28, 2002

GOODLETTSVILLE, TN — Third-quarter profits at Dollar General Corp. edged up by 2.3 percent, to $46.7 million from $45.7 million last year, as the neighborhood discount chain whittled down its interest expense by more than 15 percent, generating a cash savings of $2.1 million.

Sales edged ahead by 2.0 percent, to $1.3 billion from $1.1 billion last year.

Average gross margin held steady at 29.1 percent, but tugging at the bottom line were operating costs, which climbed higher by 130 basis points, to 22.5 percent from 21.2 percent a year ago.

For the nine months year-to-date, profits rose by 7.1 percent, to $110.1 million from $102.8 million. Driven by continued expansion, sales shot up by 20.2 percent, to $3.7 billion from $3.1 billion last year. Same-store sales rose strongly, by 7.1 percent.

Following a major accounting flap, Dollar General reduced its earnings for the period from 1998 to 2000 by $0.30 a share, more than four times the amount it had previously forecast. Last year, when it announced the accounting irregularities, saying it had incorrectly accounted for some leases and tax liabilities, the chain projected it would have to reduce earnings by about $0.07 a share.

Additionally, Dollar General has taken a $162 million charge to settle lawsuits related to the accounting snafu. In September, the retailer fired its auditor, Deloitte & Touche, and has since engaged Ernst & Young.

Cal Turner, ceo, said, "This ship faltered when I was at the helm, but it has been righted."

Dollar General Corp.

Qtr. 11/2/01 (x000) 2001 2000a % CHG
a-Financial results have been restated following a re-audit of results for the years 2000 and 1999, which resulted in reduction in earnings for the period 1998 to 2000 by 30 cents a share.
Sales $1,309,125 $1,094,360 2.0
Oper. income (EBIT) 86,078 86,411 -0.4
Net income 46,737 45,676 2.3
Per share (diluted) 0.14 0.14 0.0
Average gross margin 29.1% 29.1%
SG&A expenses 22.5% 21.2%
Nine months
Sales 3,736,883 3,108,857 20.2
Oper. income (EBIT) 210,727 199,539 5.6
Net income 110,070 102,797 7.1
Per share (diluted) 0.33 0.31 6.5
Average gross margin 27.7% 28.0%
SG&A expenses 22.0% 21.6%

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