Dollar General Corp. (NYSE:DG)

Over the observed period, net operating profit after taxes (NOPAT) generally increased, though a recent decline is apparent. The cost of capital fluctuated modestly, while invested capital consistently rose. Consequently, economic profit demonstrated a positive trend for most of the period, with a notable decrease in the most recent year.

Net Operating Profit After Taxes (NOPAT)

NOPAT increased from US$1,981,150 thousand in 2019 to US$3,664,406 thousand in 2023, representing substantial growth. However, a significant decrease to US$2,431,523 thousand was observed in 2024. This recent decline warrants further investigation to determine the underlying causes.

Cost of Capital

The cost of capital experienced a slight increase from 7.18% in 2019 to 7.50% in 2022. It then decreased to 6.89% in 2024. These fluctuations were relatively small and did not appear to have a dramatic impact on economic profit.

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 driving the growth in NOPAT observed in prior years.

Economic Profit

Economic profit generally trended upward, increasing from US$680,161 thousand in 2019 to a peak of US$1,882,291 thousand in 2023. However, economic profit decreased substantially to US$617,692 thousand in 2024. This decrease is attributable to the combined effect of the decline in NOPAT and the continued increase in invested capital, despite a slight reduction in the cost of capital.

The recent decrease in economic profit, driven by the decline in NOPAT, suggests a potential weakening in the company’s ability to generate returns exceeding its cost of capital. Monitoring these trends closely will be crucial for assessing future performance.

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 period between February 1, 2019, and February 2, 2024, demonstrates a fluctuating pattern in economic performance. Economic profit generally increased from 2019 to 2023, but experienced a substantial decrease in the most recent period. Invested capital consistently rose throughout the observed timeframe. The economic spread ratio, a measure of value creation relative to invested capital, reflects these trends with notable variations.

Economic Profit

Economic profit exhibited an upward trajectory from US$680.161 million in 2019 to US$1.882.291 million in 2023. However, a significant decline to US$617.692 million was recorded in 2024. This suggests a weakening in the company’s ability to generate returns exceeding its cost of capital in the latest year.

Invested Capital

Invested capital increased steadily over the period, moving from US$18.107 million in 2019 to US$26.309 million in 2024. This consistent growth indicates ongoing investment in the business, potentially through asset acquisition or internal development.

Economic Spread Ratio

The economic spread ratio initially showed modest growth, increasing from 3.76% in 2019 to 3.85% in 2020. A substantial increase was then observed, reaching 7.47% in 2021, followed by a slight decrease to 6.98% in 2022, and peaking at 7.60% in 2023. The ratio experienced a marked decline to 2.35% in 2024. This mirrors the trend in economic profit, indicating that the return on invested capital relative to its cost has diminished recently.

The divergence between the increasing invested capital and the declining economic spread ratio in 2024 warrants further investigation. While the company continues to invest, the returns generated from those investments appear to be decreasing, potentially signaling reduced efficiency or increased competitive pressures.

The economic profit and net sales figures demonstrate a generally positive trajectory over the observed period, though recent performance indicates a shift in this trend. Economic profit increased significantly from 2019 to 2023, but experienced a substantial decrease in 2024. Net sales exhibited consistent growth throughout the period, albeit at a moderating rate.

Economic Profit

Economic profit increased from US$680.161 million in 2019 to US$736.900 million in 2020, representing modest growth. A significant increase was then observed, with economic profit reaching US$1,561.799 million in 2021. This growth continued into 2023, reaching US$1,882.291 million. However, 2024 saw a considerable decline to US$617.692 million. This recent decrease warrants further investigation to determine the underlying causes.

Net Sales

Net sales increased steadily throughout the period. From US$25,625.043 million in 2019, sales grew to US$27,753.973 million in 2020, then to US$33,746.839 million in 2021. Growth continued, albeit at a slower pace, reaching US$34,220.449 million in 2022, US$37,844.863 million in 2023, and finally US$38,691.609 million in 2024. While sales continue to rise, the rate of increase has diminished in the most recent years.

Economic Profit Margin

The economic profit margin initially remained relatively stable, at 2.65% in 2019 and 2.66% in 2020. A substantial increase was then observed, reaching 4.63% in 2021 and 4.39% in 2022. The margin peaked at 4.97% in 2023, before experiencing a significant decline to 1.60% in 2024. This decrease in the economic profit margin in 2024, despite continued growth in net sales, suggests a potential reduction in operational efficiency or increased costs relative to revenue.

The correlation between economic profit and economic profit margin is evident. The substantial increase in economic profit from 2019 to 2023 was accompanied by a corresponding increase in the economic profit margin. The decline in economic profit in 2024 directly resulted in a significant decrease in the economic profit margin, indicating that the company’s ability to generate profit from sales diminished during that period.