Off-price retailer Dollar General
Dollar General, which is majority-owned by private equity firm KKR
Same-store sales, an important metric used to gauge the health of retailers, grew 5.9% as the company tried to balance the pressure of pricing and soaring input costs. And it seems to have done well. Operating profit jumped 16% to $350 million. This was as a result of increased pricing and better management of inventory and costs.
The company saw a sharp increase in commodity and fuel costs due to looming macroeconomic uncertainties. In addition to pushing up the cost of purchasing and delivering of merchandise, this also limited consumers’ purchasing power. The company said it is keeping a close watch on its price-conscious customers’ responses to the tough economy as well as competitive changes.
The company is launching its e-commerce website to cater to online shopping demands of existing customers and customers living outside its 35-state market area. I think this is an important move, as other retailers such as Dollar Tree
The Foolish bottom line
With a major fall in its debt and, subsequently, interest expenses, the company’s books look better to me. Things are clicking at Dollar General, and the company raised its full-year outlook for same-store sales growth to 4%-6% and for total sales growth to 12%-14%. Dollar General is making lemonade out of a really difficult consumer economy.
Navjot Kaur does not own any shares in the companies mentioned above. The Motley Fool owns shares of Wal-Mart Stores. Motley Fool newsletter services have recommended buying shares of Wal-Mart Stores. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.