What happened

Shares of discount retailer Dollar General (DG -4.27%) plunged on Thursday after the company released financial results for the third quarter of 2022. As of 3 p.m. ET, Dollar General stock was down 8%, but it had been down as much as 10% earlier in the session.

So what

In Q3, Dollar General generated net sales of $9.5 billion, up 11% year over year. And same-store sales were up an encouraging 6.8% -- the rest of the net-sales gain came from new stores.

It's good that these top-line metrics were up, but there's more to Dollar General's Q3 results than this.

Dollar General's Q3 net income was only up 8% from the same quarter of last year. And when net sales go up faster than profits, it's often a sign that something is going on operationally. 

In Dollar General's case, its own supply chain was inefficient in Q3, and management expects the problems to continue in the fourth quarter. Mind you, the company isn't being set back by external supply chain issues. It's internally struggling to get enough warehouse storage for merchandise and struggling to return shipping containers on time, resulting in higher expenses and consequently lower profits.

Now what

Because of its supply chain issues, Dollar General is now expecting to grow earnings per share (EPS) just 6% to 7% year over year in 2022, compared with previous guidance of 12% to 14% EPS growth. That's what the market is reacting to today.

However, there may be a silver lining here for Dollar General shareholders: The company thinks it could spend $1 billion to repurchase shares in Q4. That's a big amount for a single quarter. And with the stock down today, this could help the buyback plan to go further and be of greater value for shareholders.

Overall, I believe strong sales metrics for Dollar General point to the ongoing strength of the business. And it sounds like the supply chain hiccups are temporary, which could create a tailwind in 2023 as it's resolved.