Dollar General Corp. (NYSE:DG)

Over the observed period, net operating profit after taxes (NOPAT) generally increased, though a recent decline is apparent. Invested capital consistently rose throughout the period, while the cost of capital fluctuated modestly. Consequently, economic profit demonstrated a positive trend for most of the period, peaking in 2023 before experiencing a substantial decrease in the most recent year.

NOPAT Trend

NOPAT increased from US$1,981,150 thousand in 2019 to US$3,664,406 thousand in 2023, representing significant growth. However, a notable decrease to US$2,431,523 thousand was observed in 2024. This suggests a potential shift in operational performance or increased costs in the latest period.

Cost of Capital

The cost of capital experienced a slight increase from 7.92% in 2019 to 8.28% in 2022. It then decreased to 7.92% in 2023 and further to 7.55% in 2024. These fluctuations, while not dramatic, could reflect changes in market conditions or the company’s risk profile.

Invested Capital

Invested capital consistently increased throughout the period, rising from US$18,107,408 thousand in 2019 to US$26,309,034 thousand in 2024. This indicates ongoing investment in the business, potentially supporting growth initiatives or expansion.

Economic Profit

Economic profit generally followed an upward trajectory, increasing from US$546,951 thousand in 2019 to a peak of US$1,703,524 thousand in 2023. However, a significant decline to US$446,496 thousand was recorded in 2024. This decrease aligns with the reduction in NOPAT and suggests that while the business still generates economic profit, the magnitude has diminished considerably.

The substantial decrease in both NOPAT and economic profit in 2024 warrants further investigation to determine the underlying causes and potential implications for future performance. While invested capital continues to grow, the reduced profitability suggests a potential need to optimize capital allocation or improve operational efficiency.

The annual financial data indicates notable fluctuations in the profitability metrics over the presented periods.

Net Income

Net income showed a consistent increase from February 1, 2019, through January 29, 2021, rising from approximately 1.59 billion US dollars to 2.65 billion US dollars. This upward trend indicates improved profitability during these years. However, in the subsequent years, net income declined, falling to about 2.40 billion US dollars by February 3, 2023, and further decreasing to approximately 1.66 billion US dollars by February 2, 2024. This decline in net income suggests challenges impacting profitability in the most recent years analyzed.

Net Operating Profit After Taxes (NOPAT)

NOPAT similarly displayed an upward trajectory from February 1, 2019, through February 3, 2023. It grew from approximately 1.98 billion US dollars in 2019 to a peak of about 3.66 billion US dollars in 2023. This represents significant improvement in operating efficiency and profitability over this time frame. However, in the latest period ending February 2, 2024, NOPAT declined notably to around 2.43 billion US dollars, indicating a reduction in operating profitability despite the previous gains.

Overall, both net income and NOPAT exhibited substantial growth from 2019 through early 2023, reflecting enhanced financial performance and operational effectiveness. Nevertheless, the data for the most recent year reveals a marked decrease in these key profitability indicators, implying emerging issues or external factors affecting the company’s financial returns. Close monitoring and further analysis may be required to understand the drivers behind this downturn and to assess the company's future profitability prospects.

The data reflects trends in the provision for income taxes and cash operating taxes over a six-year period, from February 2019 to February 2024. Both financial items are presented in thousands of US dollars.

Provision for Income Taxes

The provision for income taxes displayed an overall upward trend between 2019 and 2023, beginning at 425,944 thousand US dollars in 2019 and peaking at 700,625 thousand US dollars in 2023. Specifically, the amount increased steadily from 2019 through 2021, reaching a high of 749,330 thousand US dollars in 2021. After this peak, the provision declined to 663,917 thousand US dollars in 2022, then rose slightly in 2023 before substantially decreasing to 458,245 thousand US dollars in 2024. This pattern suggests variability in tax expense recognition possibly influenced by changes in taxable income or tax planning strategies.

Cash Operating Taxes

Cash operating taxes also followed an increasing trend in the initial years, starting at 457,118 thousand US dollars in 2019 and reaching 823,390 thousand US dollars in 2021. This was followed by a decline in 2022 to 660,916 thousand US dollars and continued decreases through 2023 and 2024, reaching 596,198 thousand and 553,172 thousand US dollars respectively. The decline after 2021 indicates a reduction in actual cash outflows related to income taxes, which may correspond to changes in timing differences or tax provisions to cash payments.

Comparative Insights

Notably, cash operating taxes consistently exceed the provision for income taxes through 2021 but then fall below the provision in 2023 and 2024. This shift indicates a divergence between the tax expense recorded under accrual accounting (provision) and the cash paid for taxes, potentially due to deferred tax assets/liabilities or timing differences in tax payments. The peak of cash operating taxes in 2021, which is significantly higher than both preceding and subsequent years, may reflect a one-time tax payment or adjustment.

Overall, both the provision for income taxes and cash operating taxes exhibit peaks around 2021, followed by notable declines, with cash operating taxes showing a sharper descent. The divergence observed in recent years suggests evolving tax payment patterns and provision estimates that warrant closer examination for their implications on the company's tax strategy and cash flow management.

Total Reported Debt & Leases

The total reported debt and leases exhibit a consistent upward trend over the six-year period. Beginning at approximately $11.1 billion in early 2019, the figure increased steadily each year, reaching around $18.1 billion by early 2024. This represents an overall increase of roughly 63% from 2019 to 2024, with notable acceleration in growth between 2021 and 2023.

Shareholders’ Equity

Shareholders’ equity demonstrated moderate fluctuations with a slight downward trend until 2023, followed by a recovery in 2024. Initially valued at about $6.4 billion in 2019, it increased marginally in 2020 before decreasing progressively to a low of approximately $5.5 billion in early 2023. A rebound occurred in the final year to nearly $6.7 billion, almost recovering the equity levels observed at the beginning of the period.

Invested Capital

Invested capital showed a steady increase throughout the entire period. Starting at approximately $18.1 billion in 2019, it rose gradually each year, reaching about $26.3 billion by early 2024. This constitutes an increase of approximately 45% over six years, indicating continued investment and growth in capital base. The increases are consistent and without significant volatility.

Overall Analysis

The company appears to have increased its leverage significantly, as evidenced by the growing total reported debt and leases, which outpaced the growth in shareholders’ equity. Despite a temporary decline in equity through 2023, the final year saw a recovery to prior levels. The consistent rise in invested capital alongside increasing debt suggests an expansion strategy possibly funded by borrowing. The leverage position warrants monitoring due to the growing debt level relative to equity.

The economic profit exhibited a generally positive trend from 2019 through 2023, followed by a substantial decrease in 2024. Invested capital consistently increased over the observed period. The economic spread ratio mirrored the profit trend, peaking in 2023 before declining significantly in 2024.

Economic Profit

Economic profit increased from US$546,951 thousand in 2019 to US$592,735 thousand in 2020, representing a modest growth rate. A significant increase was then observed, with economic profit reaching US$1,402,400 thousand in 2021. This upward trend continued into 2022, with a value of US$1,331,959 thousand, before peaking at US$1,703,524 thousand in 2023. However, 2024 saw a marked decline to US$446,496 thousand.

Invested Capital

Invested capital demonstrated a consistent upward trajectory throughout the period. Starting at US$18,107,408 thousand in 2019, it grew to US$19,125,860 thousand in 2020, US$20,896,699 thousand in 2021, US$21,499,995 thousand in 2022, US$24,763,719 thousand in 2023, and finally reaching US$26,309,034 thousand in 2024. The rate of increase appeared to accelerate in the later years.

Economic Spread Ratio

The economic spread ratio showed an initial increase from 3.02% in 2019 to 3.10% in 2020. A substantial rise was then recorded, reaching 6.71% in 2021. The ratio remained relatively high at 6.20% in 2022 and further increased to 6.88% in 2023, indicating a strong return on invested capital. However, the ratio experienced a significant decrease in 2024, falling to 1.70%, suggesting a considerably reduced return relative to the capital employed.

The divergence between the increasing invested capital and the declining economic profit and economic spread ratio in 2024 warrants further investigation. While capital continues to be deployed, the returns generated from that capital appear to have diminished substantially.

The economic profit exhibited substantial fluctuation over the observed period. Initially, economic profit increased from 546,951 thousand US dollars in 2019 to 592,735 thousand US dollars in 2020, representing modest growth. A significant surge occurred between 2020 and 2021, with economic profit reaching 1,402,400 thousand US dollars. While remaining high, economic profit experienced a slight decrease in 2022 to 1,331,959 thousand US dollars, before increasing again to 1,703,524 thousand US dollars in 2023. However, a considerable decline was noted in 2024, with economic profit falling to 446,496 thousand US dollars.

Net Sales Trend

Net sales demonstrated a consistent upward trend throughout the period. From 25,625,043 thousand US dollars in 2019, net sales grew to 27,753,973 thousand US dollars in 2020, then to 33,746,839 thousand US dollars in 2021. Growth continued, albeit at a slower pace, reaching 34,220,449 thousand US dollars in 2022, 37,844,863 thousand US dollars in 2023, and finally 38,691,609 thousand US dollars in 2024. The rate of increase in net sales decelerated in the later years of the observation period.

Economic Profit Margin

The economic profit margin mirrored the fluctuations in economic profit. It began at 2.13% in 2019 and increased slightly to 2.14% in 2020. A substantial increase was observed in 2021, with the margin reaching 4.16%. The margin decreased to 3.89% in 2022, then rose to a peak of 4.50% in 2023. A significant decline occurred in 2024, with the economic profit margin falling to 1.15%. This suggests that while net sales continued to increase, the rate of profit generation relative to sales decreased substantially in the most recent year.

The divergence between the continued growth in net sales and the substantial decrease in economic profit margin in 2024 warrants further investigation. While revenue increased, profitability relative to that revenue diminished considerably, indicating potential pressures on cost of goods sold, operating expenses, or other factors impacting economic profit.