The drop in earnings was well below analyst projections of 16 cents per share. "We had a disappointing quarter but we believe we are headed in the right direction," chairman and CEO David Purdue said in a conference call announcing the quarterly results.
The opening of 527 new stores helped the company's sales rise 8.8% to $2.15 billion, but sales at stores open at least a year were somewhat sluggish, rising just 1.6% during the quarter. The company said May same-store sales were also up by 1.3%. The firm, which opened 132 retail outlets and eight Dollar General markets during the first quarter, expects to add a total of 800 new stores and 30 markets by the end of 2006, Purdue said.
Rising gas prices had a severe impact on the locally based retailer during the quarter, driving up transportation costs on products and reducing store visits by customers, who have cut back on shopping trips and spending to compensate for the spike in energy costs.
Steeper product discounts and an increased demand for food products and other consumables, which carry lower margins, impacted the company's gross profit even further, causing it to fall 132 basis points during the quarter.
Dollar General, which operates more than 8,000 stores in 34 states, said it expects earnings of 18 cents to 22 cents for the second quarter, which ends Aug. 4, lower than the average forecast by analysts of 23 cents. For the full year, the executives say they expect profit of $1.09 to $1.16 per share, close to analysts estimates of $1.14 per share.
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