Dollar General Corp. (NYSE: DG) reported third-quarter 2012 results before markets opened this morning. The discount retailer posted diluted earnings per share (EPS) of $0.62 on revenues of $3.96 billion. In the same period a year ago, Dollar General reported EPS of $0.50 on revenue of $3.6 billion. Today’s results also compare to the Thomson Reuters consensus estimates for EPS of $0.60 and $3.96 billion in revenue.

The company said that same-store sales rose 4% in the third quarter, compared with a 6.3% gain in 2011.

The company’s CEO said:

Although our performance over the Thanksgiving weekend and start of the holiday season has been encouraging, we continue to be cautious for the remainder of the year. We are facing a significant same-store sales comparison from our 2011 fourth quarter, which included very strong January sales, growing near-term pressures that are impacting our customers’ confidence and spending, and a challenging competitive environment.

Regarding Dollar General’s outlook, the company said it now expects full-year adjusted EPS of $2.82 to $2.85, slightly below the consensus estimate of $2.86. Same-store sales for the fourth quarter are expected to rise by 3% to 4%. For the full fiscal year, the company expects same-store sales to rise 4.5% to 5%, based on a 52-week year. Total sales are expected to rise 10% to 10.5% on a 52-week basis.

Gross profit was virtually flat, at 30.9% in the third quarter compared with 31% in the same period a year ago. Positive factors included higher inventory markups and an $11 million inventory charge in 2011 that was not repeated this year. Weighing on gross profit were higher markdowns, a smaller impact from price increases and an increase in the sales of consumables. Operating profit rose from 8.6% a year ago to 9.1% in the 2012 third quarter.

Consumables make up about three-quarters of Dollar General’s revenues, and the problems that the store mentions related to gross profits need to be addressed more effectively than the company has done so far.

Shares are up about 0.7% in premarket, trading this morning at $46.88, in a 52-week range of $39.83 to $56.04. Thomson Reuters had a consensus analyst price target of $60.00 before today’s results were announced.

Paul Ausick

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