Dollar General Corporation reported financial results for its 2016 first quarter ended April 29, 2016.
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Net sales increased 7 percent to $5.27 billion in the 2016 first quarter compared to $4.92 billion in the 2015 first quarter. Same-store sales increased 2.2 percent over the 2015 first quarter resulting from increases in both customer traffic and average transaction amount.
Same-store sales increases were driven by positive results in both the consumables category and certain of the non-consumables categories, with sales of consumable merchandise outpacing sales of non-consumable merchandise.
Within the non-consumables categories, growth in same-store sales was due to seasonal and home products. The net sales increase also was positively affected by sales from new stores, partially offset by sales from closed stores.
Gross profit, as a percentage of sales, was 30.6 percent in the 2016 first quarter compared to 30.5 percent in the 2015 first quarter, an increase of 16 basis points.
The majority of the gross profit rate increase was due to higher initial inventory markups and lower transportation costs partially attributable to lower fuel rates, offset in part by a greater proportion of sales of consumables merchandise, which have a lower gross profit rate than non-consumables merchandise, increased inventory shrinkage, and higher markdowns.
Selling, general and administrative expense (SG&A) as a percentage of sales was 21.5 percent in the 2016 first quarter compared to 21.8 percent in the 2015 first quarter, a decrease of 26 basis points.
The majority of the SG&A decrease was due to lower utilities costs, administrative payroll, incentive compensation, travel expenses, workers' compensation costs and advertising costs, as well as a higher volume of convenience fees associated with customer cash-back transactions.
Partially offsetting these items were retail labor and occupancy costs, each of which increased at a rate greater than the increase in sales.
The company's net income was $295 million, or $1.03 per diluted share, in the 2016 first quarter, compared to net income of $253 million, or $0.84 per diluted share, in the 2015 first quarter.
The effective income tax rate in the 2016 first quarter was 35.4 percent compared to 37.7 percent in the 2015 first quarter.
The effective income tax rate was lower in the 2016 first quarter due primarily to the company's early adoption of an amended accounting standard for employee share-based payments and the recognition of additional amounts of the Work Opportunity Tax Credit ("WOTC") in the 2016 first quarter.
The December 2015 reenactment of the WOTC allowed the company to receive credits for eligible employees hired during the first quarter of 2016. In 2015, only eligible employees hired on or before December 31, 2014, were credit eligible.
The share-based payment accounting amendments are effective for fiscal years beginning after December 15, 2016 with early adoption permitted. The company adopted this guidance in the 2016 first quarter.
The income tax benefit in the 2016 first quarter of this accounting standard adoption was approximately $9.0 million or $0.03 cents per diluted share.
Due to the majority of the company's share-based awards typically vesting in the first quarter, this amended accounting standard is anticipated to have the most significant impact in the first quarter. It is not expected to reoccur to this degree over the balance of the year. ■