Buyback Wednesdays – $2 Billion Additional Buyback Announced by Dollar General

Buyback activity continued to decline with only 7 companies announcing stock buybacks last week. Considering most companies announce buybacks when reporting earnings, this drop is expected. Salesforce (CRM) announced a $10 billion buyback, the most significant buyback in dollars. The buyback represents around 6% of its market cap at announcement. This is the company’s first-ever share repurchase program. Commenting on the company’s performance during the second quarter of fiscal 2023, Marc Benioff, Chair and Co-CEO of the company said,

“We had another strong quarter, with revenue of $7.7B growing 22% year-over-year and 26% in constant currency, showing yet again the durability of our business model. And, we’re thrilled to initiate our first-ever share repurchase program to continue to deliver incredible value to our shareholders on our path to $50 billion in revenue in FY26.”

Precision Drilling Corporation (PDS) topped our list this week after announcing a buyback of 1,148,771 shares, representing nearly 9% of its market cap at announcement. However, the one that grabbed our attention was the $2 billion additional buyback announcement on August 24, 2022 by Dollar General (DG), representing around 4% of its market cap. Dollar General, the U.S.-based discount retailer, operates 18,190 stores in 47 states. The company is prolific with opening new stores and in the second quarter of fiscal 2022, the company opened 227 new stores, remodeled 533 stores, and relocated 30 stores. This works out to opening two or more stores every single day of the quarter and remodeling 6 stores a day.

DG’s fiscal second-quarter earnings report show that the company exhibited strong performance with revenue growing 9% year-over-year to $9.43 billion. Same-store-sales increased 4.6%, which indicates the growth in revenue is not just from opening new stores. Earnings per share increased 10.8% to $2.98 compared to $2.69 in Q2, 2021. The company reported net income of $678 million for the second quarter of 2022, an increase of 6.4% compared to $637 million in the second quarter of 2021. These strong results can be attributed to prior buybacks, the opening of new stores, improved sales at remodeled stores and surprisingly an improvement in gross margin. Not only did the company report Q2 results that beat expectations, it increased its forecast for both revenue and same store sales.

DG has been constantly buying back its shares. Since March 2019, the company has announced $7 billion in buybacks including the recent $2 billion additional buyback. Since 2018, the company has bought back around 15% of its outstanding shares. In the second quarter of 2022, the company repurchased $349 million of its common stock at an average price of $233.36 per share. With the recent additional $2 billion, the company now has a total of $3 billion, or 5.6% of its market capitalization, allocated for future repurchases.

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