Highlights:

- Third Quarter Same-Store Sales Increased 4.4%; Total Sales Increased 10.5%
- Third Quarter EPS Increased 19% to $0.74; Adjusted EPS Increased 14% to $0.72
- Announces $200 Million of Share Repurchases in the Third Quarter and Increases Share Repurchase Authorization by $1.0 Billion
- Updates 2013 Financial Guidance

Third Quarter Highlights

The Company’s net income increased by 14 percent to $237 million in the 2013 third quarter compared to net income of $208 million in the 2012 third quarter, and earnings per diluted share (“EPS”) of $0.74 in the 2013 third quarter increased 19 percent over EPS of $0.62 in the 2012 third quarter.

Adjusted net income, as defined under “Non-GAAP Disclosure” below, increased 10 percent to $231 million in the 2013 third quarter compared to $210 million in the 2012 third quarter and adjusted EPS increased 14 percent to $0.72 per diluted share in the 2013 third quarter from $0.63 per diluted share in the 2012 third quarter. Net income in the 2013 third quarter includes a benefit of $6 million, or approximately $0.02 per diluted share, resulting from the reversal of income tax reserves that were established in 2009.

Net sales increased 10.5 percent to $4.38 billion in the 2013 third quarter compared to $3.96 billion in the 2012 third quarter. Same-store sales increased 4.4 percent, with increases in both customer traffic and average transaction value. Consumables sales continued to increase at a higher rate than non-consumables in the 2013 third quarter, with the most significant growth due to strong sales of tobacco products, perishables and candy and snacks. Same-store sales growth was solid in seasonal and home products, while apparel sales were affected by a planned merchandising initiative that reduced apparel inventories in more than 4,000 stores during the 2013 third quarter.

Gross profit increased by 8.3 percent and, as a percentage of sales, decreased by 61 basis points to 30.3 percent in the 2013 third quarter compared to the third quarter of 2012. The majority of the gross profit rate decrease in the 2013 third quarter as compared to the 2012 third quarter was due to an increase in the mix of consumables and increased sales of lower margin consumables, including tobacco products and expanded perishables offerings, all of which contributed to lower initial inventory markups.

In addition, the Company’s inventory shrinkage rate increased and markdowns were higher than in the 2012 period. These factors were partially offset by transportation efficiencies, including the impact of lower average fuel costs. The Company recorded a LIFO benefit of $3.7 million in the 2013 quarter compared to a LIFO provision of $0.1 million in the 2012 quarter.

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Dollar General