Comparing Dollar General's Financial Performance with that of Family Dollar
Dollar General has been performing well financially ever since they were established in 1955. In its first 10 years of existence, Dollar General had grown to 255 stores with nearly $26 million in annual sales. In 2002, annual sales were $6.1 billion and there were 6,300 stores in 27 states in operation. Strategy shifts as well as major acquisitions allowed for Dollar General to continue performing well financially over the years. Even despite major accounting errors in 2001, Dollar General continued to increase their sales.
Through Dollar Generals initiative and success, the door was open for others to thrive in the extreme-value retailing industry. One company that was able to take Dollar General's concept and use it for their own success was Family Dollar. Family Dollar is considered to be the main competitor of Dollar General. They have been able to expand faster in terms of geography than Dollar General has, with stores in 41 states. Financially, both companies have been performing well.
Although the number of stores a company may have doesn't always equate to success financially, it usually is a sign that they are performing well. Over the period 1998-2002, Dollar General opened 2,371 new stores compared to Family Dollars' 1,599. Based on this number alone you might think that Dollar General is performing better financially. Over the period 2000-2001, Dollar General and Family Dollar both increased net sales by nearly 17 percent. However, Dollar General increased its net income from $70,642 to $207,513. The nearly 193 percent increase, is far greater than the 10.2 percent increase that Family Dollar experienced. In 2002 though, Family Dollar's earnings per share were nearly doubled that of Dollar General, meaning that Dollar General had a much higher number of outstanding shares. At this point, Family Dollar was probably a better stock to invest in. Dollar General had also experienced a decrease in total assets over this period while Family Dollar's assets increased by nearly 25 percent. The accounting errors that took place accompanied with lawsuits that followed played a major role in some these numbers for Dollar General. I believe that both companies performed well financially. If it wasn't for the lawsuits, Dollar General probably would have performed much better financially then Family Dollar. Based on the factors mentioned above, it's hard to say who performed better financially. Dollar General's net income may have been higher but they had a loss in total assets and also had a much lower EPS.
2. What is your assessment of the accounting problems at Dollar General? Did anything unethical occur? What evidence indicates that the misstatements were simply errors, with no deliberate intent? What reasons can you think of that would account...