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Dollar General posts strong Q2, raises guidance

Goodlettsville, Tenn. - Not surprisingly, consumables continued to lead the pack in sales for Dollar General during its second quarter. But home was close behind, growing 16% again, following ongoing improvements in performance in recent quarters.

"Our home business continues to do well," said David Tehle, evp, cfo.

That trend goes hand in hand with another movement - increasing traffic from higher-income bracket shoppers.

Richard Dreiling, chairman and ceo, said: "People are recognizing we are offering values consistently on a day to day basis... And we are seeing many more faithful customers with higher incomes than in the past. We're working to retaining these customers while building our brand across new [markets]."

This was especially evident in recent shifts in Dollar General's back-to-school business, he continued.

"Back to school was up for us in the high single digits, and we're very pleased with what we are seeing there," Dreiling said. "Last year our back to school was more needs based - pencils, paper notebooks. This year they were buying the backpack and the things kids hang on their backpacks."

To build on the momentum, Dollar General is working to expand its offerings of better-tier brands. For example, the retailer recently signed on with Breyers and Edy's ice creams - "that give us brand recognition," Dreiling said.

In the second quarter, ended August 3, Dollar General reported a 47% jump in net income to $214 million. Adjusted net income was up 27% to $231 million versus $181 million. Diluted earnings per share increased to $0.64 from $0.42 last year. And adjusted diluted EPS grew 33% to $0.69 compared to $0.52.

Sales increased 10.4% to $3.95 billion, and same-store sales were up 5.1% for the quarter.

Year-to-date net income hit $428 million, or $1.27 per diluted share, representing a 41% leap from the year-ago period. Ssales for the 26 weeks increased 11.7% to $7.85 billion, and same-store sales were up 5.9%.

Looking ahead, Dollar General raised its full-year guidance for adjusted earnings to $2.77 to $2.85, including a 4 cents per share benefit from the settlement of an income tax audit in the second quarter. Prrevious guidance called for EPS of $2.68 to $2.78


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