Dollar General posts lower profit (layoffs)

[Halophyte]

(Midwest distribution center is also laying off - Halo)


Dollar General posts lower profit

By Emily Kaiser
Thu Jun 1, 10:18 AM ET



CHICAGO (Reuters) - Dollar General Corp. (NYSE: DG - news) on Thursday posted a 27 percent drop in quarterly profit, worse than analysts had expected, as its low-income customers grappled with steep energy costs and cut back on purchases of clothing and home decor items.

The ultra-discount retailer also forecast earnings for the current period that were below Wall Street estimates, and its shares dipped about 1 percent, or 16 cents, to $16.14 in early New York Stock Exchange trading..

Profit fell to $47.7 million, or 15 cents per share, in the first quarter, which ended on May 5, from $64.9 million, or 20 cents per share, a year earlier.

Analysts on average had expected earnings of 16 cents per share, according to Reuters Estimates. The company said in March that profit would probably be between 15 cents and 18 cents.

Charles Grom, retail analyst with J.P. Morgan, said the profit decline marked the company's worst performance since the fourth quarter of 2001, which followed the September 11, 2001, attacks on New York and Washington.

Quarterly sales rose 8.8 percent to $2.15 billion, helped by the opening of 527 net new stores. Sales at stores open at least a year -- a key retail measure known as same-store sales -- rose 1.6 percent.

Dollar General also said May same-store sales rose 1.3 percent, which was somewhat better than analysts' expectations for a 0.8 percent rise.

Dollar General has been hit particularly hard by rising gasoline prices because it caters to low-income customers, who have cut back on shopping trips and spending.

The retailer said its gross profit rate fell by 132 basis points, hurt by steeper discounts and an increase in demand for consumable products such as food, which carry lower margins.

Grom said the gross profit decline was even steeper than he had expected, which accounted for a large portion of the earnings disappointment.

For the current second quarter, which ends on August 4, Dollar General expects earnings of 18 cents to 22 cents per share. Analysts on average forecast 23 cents, according to Reuters Estimates.

For the full year, Dollar General expects profit of $1.09 to $1.16 per share, including about 1 cent in costs for expensing stock options. Analysts on average expected $1.14.

"Although the stock looks inexpensive on the surface -- trading at 13.3 times our 2007 (earnings estimate), or a 22.7 percent discount to historical levels -- we see the stock as a value trap at this juncture," Grom wrote in a note to clients, reiterating his "underweight" rating.



http://news.yahoo.com/s/nm/20060601/...neral_earns_dc

[TomD]

I'm not sure why you elected to post on DG on this site. The reason I'm replying is that I owned a couple of hundred shares of DG for a several years on the advice of the same broker who had me very heavily into Worldcom.

The broker is a rep for Edward Jones so you can see the quality of their advice. The irony is that they charge a ton for their trades on the theory that their advice is worth it. Makes me happy that I now do my investing through Etrade so my own stupid advice is now free.