Earnings wrap: Dollar General, Genesco

With many shoppers still uneasy, two of region's biggest retail names guide outlook below expectations

Dollar General executives said Thursday morning that the discount retailer posted a fourth-quarter profit of $322 million, up 1.5 percent from a year ago. Per diluted share, profits climbed to $1.01 — in line with analysts' expectations — from 97 cents.

Revenues at Goodlettsville-based Dollar General climbed 7 percent to $4.49 billion. Gross margins slipped to 31.9 percent from 32.5 percent in the year-ago quarter, while operating margins came in at 12.0 percent versus 12.4 percent. Same-store sales rose 1.3 percent, helped by good numbers from tobacco and perishables.

Chairman, President and CEO Rick Dreiling said this winter's series of storms hurt sales, as did "an aggressive competitive retail landscape and our customers’ uncertainty about spending." But he noted that cost management helped Dollar General post a better-than-expected gross margin number.

Looking ahead, Dreiling and his team expect to open 700 stores this year — up from 650 in 2013 — and see same-store sales rising 3 to 4 percent with overall top-line growth of 8 to 9 percent. Diluted EPS are forecast to come in between $3.45 and $3.55. As of this morning, the Street is at $3.69 but Avondale Partners analysts Mark Montagna said last week he is looking for $3.60.

Dollar General execs also said they have been actively buying back the company's shares. After buying back $620 million worth of stock in 2013, they have spent another $200 million so far this year on repurchases.

Shares of Dollar General (Ticker: DG) initially traded down more than 2 percent in pre-market trading but steadily recovered about half of that drop. They have slipped about 2 percent over the past three months and closed Wednesday trading at $59.29.

 
Shoe and hat retailer Genesco earned $42.2 million in its fiscal fourth quarter, up 9 percent from the year before. After adjusting for various special items, earnings from continuing operations came in at $51.0 million versus $51.4 million. Per diluted share, that equated to $2.16, two cents below what analysts had been looking for.

Chairman, President and CEO Bob Dennis also said the quarter didn't bring a change to the "inconsistent sales patterns" his team faced throughout 2013 but said "the fundamentals of our business remain intact." Overall same-store sales rose 1 percent during the quarter, with gains at the Lids Sports and Johnston & Murphy groups offset by a 7 percent drop at the company's Schuh division in the United Kingdom.

Looking ahead to 2014, Genesco execs expect the company to earn between $5.40 and $5.55 per diluted shares this year, the midpoint of which is 3 percent below the Street's current forecast. The company's plan calls for low-single-digit sales growth, and Dennis said his team is still cautious in part because of "the lack of a strong new fashion driver in the teen footwear space and continued uncertainty around customer traffic."

Genesco shares (Ticker: GCO) closed Wednesday trading at $72.95. They're up about 3 percent over the past three months.

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