Dollar General Corporation reported financial results for its fiscal 2016 third quarter ended October 28, 2016.
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The company reported net income of $235 million, or $0.84 per diluted share, in the 2016 third quarter, compared to net income of $253 million, or $0.86 per diluted share, in the 2015 third quarter.
Net sales increased 5.0 percent to $5.32 billion in the 2016 third quarter compared to $5.07 billion in the 2015 third quarter.
Same-store sales decreased 0.1 percent from the 2015 third quarter primarily due to a decline in traffic partially offset by an increase in average transaction amount.
Same-store sales were driven by positive results in the consumables category offset by negative results in the seasonal, apparel and home products categories.
The net sales increase was positively affected by sales from new stores, modestly offset by sales from closed stores.
Gross profit, as a percentage of net sales, was 29.8 percent in the 2016 third quarter, a decrease of 49 basis points from the 2015 third quarter.
The gross profit rate decrease was primarily attributable to higher markdowns, driven mainly by inventory clearance and promotional activities, a greater proportion of sales of consumables, and increased inventory shrink, partially offset by higher initial inventory markups.
Selling, general and administrative expense ("SG&A"), as a percentage of net sales, was 22.5 percent in the 2016 third quarter compared to 22.0 percent in the 2015 third quarter, an increase of 48 basis points.
The SG&A increase was primarily attributable to increased retail labor and occupancy costs. The 2016 third quarter also included charges of $13.0 million, or 25 basis points, associated with the acquisition of the former Walmart Express store locations and related closure of existing stores, $11.0 million of which was for lease termination and other exit and disposal costs.
In addition, the company experienced an increase in disaster-related expenses of $7.7 million, or 14 basis points, most of which were hurricane related. Partially offsetting these items were reductions in administrative payroll costs, incentive compensation expenses and advertising expenses. The 2015 period reflects expenses of $6.1 million related to a corporate restructuring for severance-related benefit costs.
The effective income tax rate was 36.2 percent for the 2016 third quarter compared to a rate of 37.0 percent for the 2015 third quarter. The effective income tax rate was lower in the 2016 third quarter due primarily to the recognition of additional amounts of the Work Opportunity Tax Credit (WOTC) in the 2016 third quarter.
The December 2015 reenactment of the WOTC allowed the company to receive credits for eligible employees hired during the third quarter of 2016.
By comparison, in the 2015 third quarter, only a limited number of employees (hired on or before December 31, 2014) were eligible for the credit. ■