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Apparel sales drop in Q3 - Dollar General
06 Dec '11
5 min read
Selling, general and administrative expenses ("SG&A"), as a percentage of sales, were 22.4 percent in the 2011 third quarter compared to 22.8 percent in the 2010 third quarter, a decrease of 45 basis points. The decline in SG&A, as a percentage of sales, was largely due to the impact of increased sales and improved utilization of retail store labor, resulting primarily from the Company's new workforce management initiatives. A decrease in incentive compensation, as well as other cost reduction and productivity initiatives, including the impact of energy management and recycling, favorably impacted SG&A, as a percentage of sales, in the 2011 quarter. These improvements were partially offset by increased depreciation and amortization costs, store data communications costs and charges resulting from an increase in customers' usage of debit cards.
Operating profit increased by 13 percent to $311 million, or 8.6 percent of sales, in the 2011 third quarter, compared to $274 million, or 8.5 percent of sales, in the 2010 third quarter.
Interest expense was $39 million in the 2011 third quarter, compared to $67 million in the 2010 third quarter. The decrease in the 2011 period from the 2010 period was due to lower outstanding borrowings, resulting from the Company's repurchases of indebtedness in 2011 and 2010 and lower all-in interest rates on its term loan primarily due to reduced notional amounts on interest rate swaps.
The effective income tax rate increased to 37.1 percent for the 2011 period compared to 35.6 percent for the 2010 period. The 2010 period included the elimination of selected income tax reserves upon the effective resolution of previously uncertain tax positions that did not reoccur in the 2011 period.
For the 39-week period ended October 28, 2011, total sales increased 11.2 percent over the comparable 2010 period, to $10.62 billion, including an increase in same-store sales of 5.9 percent.
Gross profit, as a percentage of sales, was 31.6 percent in the 2011 39-week period compared to 31.9 percent in the 2010 period, a decrease of 35 basis points. The Company recorded increases to its LIFO reserve of $25.4 million in the 2011 period compared to $0.7 million in the 2010 period. Other factors contributing to the decrease in the Company's gross profit rate included a higher mix of sales of consumables; increased commodity costs, which resulted in higher merchandise purchase costs; higher markdowns to sell through certain home and apparel products; and increased transportation costs, which were impacted by higher fuel rates. These factors were partially offset by selective price increases, lower inventory shrinkage and lower distribution center costs, as a percentage of sales.
Operating profit increased by 13 percent to $311 million, or 8.6 percent of sales, in the 2011 third quarter, compared to $274 million, or 8.5 percent of sales, in the 2010 third quarter.
Interest expense was $39 million in the 2011 third quarter, compared to $67 million in the 2010 third quarter. The decrease in the 2011 period from the 2010 period was due to lower outstanding borrowings, resulting from the Company's repurchases of indebtedness in 2011 and 2010 and lower all-in interest rates on its term loan primarily due to reduced notional amounts on interest rate swaps.
The effective income tax rate increased to 37.1 percent for the 2011 period compared to 35.6 percent for the 2010 period. The 2010 period included the elimination of selected income tax reserves upon the effective resolution of previously uncertain tax positions that did not reoccur in the 2011 period.
For the 39-week period ended October 28, 2011, total sales increased 11.2 percent over the comparable 2010 period, to $10.62 billion, including an increase in same-store sales of 5.9 percent.
Gross profit, as a percentage of sales, was 31.6 percent in the 2011 39-week period compared to 31.9 percent in the 2010 period, a decrease of 35 basis points. The Company recorded increases to its LIFO reserve of $25.4 million in the 2011 period compared to $0.7 million in the 2010 period. Other factors contributing to the decrease in the Company's gross profit rate included a higher mix of sales of consumables; increased commodity costs, which resulted in higher merchandise purchase costs; higher markdowns to sell through certain home and apparel products; and increased transportation costs, which were impacted by higher fuel rates. These factors were partially offset by selective price increases, lower inventory shrinkage and lower distribution center costs, as a percentage of sales.
Dollar General Corporation
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