Dollar General Corp.'s comparable store sales growth in the second half of the fiscal year could take a hit from tough year-over-year comparisons, the company's CFO and executive vice president, John Garratt, said during a May 31 analyst call.
The company reported a year-over-year same-store sales increase of 2.1% for the fiscal first quarter, ended May 4. That growth figure is going to be more difficult to achieve in the second half of the year when the company is measured against its prior-year numbers, Garratt said. The retailer reported same-store growth of 4.3% for the fiscal third quarter and 3.3% for the fiscal fourth quarter of fiscal 2017.
Dollar General said it expects comparable store sales growth in the mid-2% range for the 2018 full fiscal year.
"We're off to a good start this year, but bear in mind, the second quarter comp sales gets tougher relative to the first quarter," Garratt said.
The second half of fiscal 2017 marked Dollar General's strongest comparable sales about two years. At the time, Dollar General executives told analysts that the steep growth came from a cutback in promotional activity and an increase in foot traffic.
The comparable sales figure should be at least partially outweighed by a "much higher than usual" influx of new stores to the chain, largely due to Dollar General's 2017 acquisition of smaller dollar store chain, Dollar Express LLC, Garratt said. Dollar General added 741 new stores in the second half of 2017. Those stores will be open for more than a year in the second half of 2018, which means that the company should see some benefit to comparable store sales, Garratt said.
"The second half of 2018 will have an unusually high number of the stores rolling into the comp base," he said. "The anticipated positive impact of these stores helps to offset the tougher comparison we faced in the second half of the year."
Also weighing on the company in the second half of 2018, Dollar General will continue to see headwinds from freight costs and fuel, driving down margins, Garratt said. He added that Dollar General will begin to lap those pressures in the second half of the year and that the company is "executing a strategy that we believe can help mitigate the impact of these headwinds over time."
To reduce the pressure on margin from freight costs, Dollar General is opening distribution centers to reduce the miles it needs to transport goods. The company has also expanded its private fleet and diversified its carrier base, Dollar General CEO Todd Vasos said during the call.
