Expectations elevated at Dollar General
GOODLETTSVILLE, Tenn. — Dollar General results showed that low-end consumers have some spending power and a taste for its brand of discount retail.
Sales increased 11.2% to $3.58 billion at the company’s 9,641 stores, while same-store sales increased 5.9% and net income increased 25% to $181 million, excluding nonrecurring charges related to the early repayment of debt. On that same basis, earnings per share increased to 52 cents, four cents better than analysts expected and nearly 24% higher than the prior-year profit of 42 cents.
Analysts noted the positive variance was due to such wide ranges of factors as the better-than-expected 5.9% same-store sales increase, less-than-expected gross margin contraction and effective expense leverage.
“Our same-store sales increase of 5.9% in the quarter represents an acceleration from the first quarter and demonstrates our ability to balance the challenges of pricing and rising input costs. Our customers are depending on us even more for the convenience and value we offer,” Dollar General chairman and CEO Rick Dreiling said. “In this period of economic uncertainty, we continue to focus on factors that we can control, and we still expect to deliver strong financial performance in 2011.”
Accordingly, the company increased it full-year profit guidance to incorporate the second-quarter results and now earnings per share are expected to fall within a range of $2.22 to $2.30.
Dreiling noted that the company’s sales momentum was driven by increases in customer traffic and average transaction size with sales in consumable product categories growing at a faster rate than non-consumables. The most significant growth was related to changes in and further expansion of the company’s candy and snacks, packaged foods, and perishables offerings. Slower sales growth seen in home, apparel and seasonal categories was attributed to less discretionary spending by consumers.
With increased sales of consumables, a decline in the company’s gross margin rate was expected, but the magnitude was not as great as analysts feared, dropping to 32.1% in the second quarter from 32.2% the prior year. Conversely, expenses as a percent of sales show greater improvement, declining to 22.3% from 22.9%. The company said a key driver of the improvement was reduced store labor expense as the company has implemented a labor management program and simplified some of its merchandising processes.
At the midpoint of its fiscal year, Dollar General has opened 301 new stores and remodeled or relocated 371 others, putting the company on track to open approximately 625 new stores and remodel or relocate 575 others.
Sunstar Americas signs licensing deal for ‘Star Wars’ toothbrushes
CHICAGO — Oral care company Sunstar Americas has inked a licensing agreement with film and entertainment company Lucasfilm to launch a new line of manual and power toothbrushes featuring iconic characters and lightsabers from the “Star Wars” film saga and “Star Wars: The Clone Wars” television series.
Earlier this year, Lucasfilm announced the 3-D movie release date of “Episode I: The Phantom Menace” for February 2012. Sunstar will launch the new “Star Wars” toothbrushes just in time for the movie release. The brushes will be available in power, manual and light-up designs.
The manual toothbrushes include “Star Wars” icons Darth Vader, Clone Captain Rex, Yoda and Anakin Skywalker. The brushes are designed with Dome Trim bristles to help reduce gingivitis.
Fans can feel as if they are a part of the “Star Wars” galaxy with the light-up lightsaber toothbrush. The brush flashes for one minute to encourage kids to brush longer. Available in three lightsaber designs, these toothbrushes have interdental bristles to clean hard-to-reach areas between teeth.
Power toothbrushes complete the line of products. These brushes feature an oscillating brush head with soft bristles to clean teeth, while gently massaging gums.
Manual toothbrush displays will be hitting store aisles in February 2012, with additional power and light-up toothbrushes coming in April 2012.
Federal court issues rulings in favor of Teva in MS drug case
JERUSALEM — A federal court has acted in favor of Teva Pharmaceutical Industries in the drug maker’s patent infringement case against several generic drug companies seeking to market versions of its multiple sclerosis drug.
Teva said the U.S. District Court for the Southern District of New York issued a set of claim construction rulings in its patent infringement case against Sandoz and Momenta Pharmaceuticals, and Mylan and Natco regarding the drug Copaxone (glatiramer acetate) that favored Teva; the two parties are each seeking to market generic versions of the drug. A claim construction decision is when a U.S. District Court examines evidence from all parties on the meanings of relevant words used in a patent claim; the court’s interpretation of those words affects how it assesses patent infringement and validity.
The trial is set to begin on Sept. 7.
What sets the case apart from typical patent-infringement cases involving branded and generic drug makers is the nature of Copaxone. Though approved as a pharmaceutical drug, its molecular complexity places it more in league with biotech drugs, which makes the development of a generic version more challenging.
A similar case was that of Sanofi’s blood-thinning drug Lovenox (enoxaparin sodium), also a complex molecule approved as a pharmaceutical; Sandoz now markets a generic version of that drug. According to some analysts, such cases could help shape the Food and Drug Administration’s regulations concerning follow-on biologics, now that the agency must draft them thanks to the regulatory approval pathway created by the Patient Protection and Affordable Care Act.