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Dollar General to speed up new store openings as rivals merge
March 12, 2015 / 11:17 AM / 3 years ago

Dollar General to speed up new store openings as rivals merge

(Reuters) - Dollar General Stores Inc (DG.N) said on Thursday it plans to accelerate new store rollouts in a bid to bolster its position among U.S. discount retailers after failing to upend a merger agreement between rivals Family Dollar FDO.N and Dollar Tree (DLTR.O).

The sign outside the Dollar General store in Westminster, Colorado is pictured December 4, 2014. REUTERS/Rick Wilking

Dollar General, which will no longer be the top U.S. discount retailer after the merger of its two rivals, said it plans to open approximately 730 new stores in 2015, representing 6 percent growth in total square footage.

It plans to grow its square footage by 7 percent in 2016.

During 2014, the company opened 700 new stores.

The discount retailer also forecast earnings of between $3.85 and $3.95 per share for the year ending Jan. 31, 2016, below the average analyst expectation of $3.99.

The company said it expects to spend $500 million to $550 million in 2015, which includes the cost of opening the new stores.

Dollar General also authorized a $1 billion share repurchase plan, and said Chief Financial Officer David Tehle will retire on July 1.

In January, Family Dollar shareholders rejected Dollar General’s $9.1 billion all-cash offer, choosing instead to approve an $8.5 billion cash-and-stock offer from Dollar Tree.

Dollar General said full-year total sales are expected to grow 8 percent to 9 percent in its current fiscal year, translating to sales of $20.42 billion to $20.61 billion. Same-store sales are expected to grow 3 percent to 3.5 percent.

Analysts on average are expecting revenue of $20.54 billion, according to Thomson Reuters I/B/E/S.

The company’s gross profit as a percentage of sales was 31.7 percent in the fourth quarter, down 23 basis points, impacted by increased sales of lower margin products like tobacco and perishable products.

Dollar General also said a now-resolved labor dispute at U.S. West Coast ports resulted in a slowdown of its higher margin inventory, with an estimated $8.5 million negative impact on gross profit in the fourth quarter and contributed to lower initial markups.

Net income rose to $355.4 million, or $1.17 per share, in the fourth quarter ended Jan. 31 from $322.2 million, or $1.01 per share, a year earlier.

Net sales increased 9.9 percent to $4.94 billion. Analysts had expected earnings of $1.17 per share and revenue of $4.95 billion.

Same-store sales rose 4.9 percent, in line with the average expectation of analysts polled by research firm Consensus Metrix.

Reporting by Nandita Bose in Chicago and Sruthi Ramakrishnan in Bengaluru; Editing by Joyjeet Das, Sriraj Kalluvila and Paul Simao

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