Dollar General up 19 percent

Helped by growing same-store sales, along with deep cuts in interest expense and widening margins, second quarter profits at Dollar General Corp. climbed 19 percent, to $71.3 million from $59.9 million a year ago.

Sales at the low-price neighborhood retailer improved 11.2 percent, to $1.8 billion from $1.7 billion, largely on the strength of new store openings. Same-store sales increased 3.2 percent.

Providing a lift to the bottom line, the retailer slashed interest expense virtually in half, 48.8 percent, to $4 million from $7.9 million the preceding year, generating a cash savings of $3.9 million.

But acting as a drag, costs climbed during the period 90 basis points, or nine-tenths of a percentage point, to 23.4 percent from 22.5 percent last year.

With higher costs offsetting wider margins and stronger sales, operating profit rose 6.2 percent, to $108.1 million from $101.8 million a year ago.

In a major lift to the bottom line, the company's income tax rate was reduced to 31.5 percent from 36.2 percent in the same period a year ago. This year's tax provision reflects an adjustment of $6.2 million to reduce state tax liabilities, and another $2 million in reduced interest accrual.

Home products lagged far behind other product categories during the quarter, posting a mangy 0.2 percent increase, to $208.2 million from $207.7 million. In sharp contrast, highly consumable items jumped 13.6 percent, to $1.2 billion from $1 billion, making it the engine that drives the retailer's sales.

Dollar General Corp.

Qtr. 7/30 (x000) 2004 2003 % chg
Sales $1,836,243 $1,651,094 11.2
Oper. Income (EBIT) 108,126 101,843 6.2
Net income 71,322 59,936 19.0
Per share (diluted) 0.22 0.18 22.2
Average gross margin 29.2% 28.6%
SG&A expense 23.4% 22.5%
Six months 2004 2003 % chg
Sales 3,584,202 3,220,158 11.3
Oper. Income (EBIT) 222,676 204,794 8.7
Net income 139,171 120,268 15.7
Per share (diluted) 0.42 0.36 16.7
Average gross margin 29.3% 28.7%
SG&A expenses 23.1% 22.4%

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