Analysis of Debt
Total Debt (Carrying Amount)
Dollar General Corp., balance sheet: debt
US$ in thousands
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
Total long-term obligations exhibited a substantial upward trajectory over the analyzed six-year period, increasing from $2.86 billion on February 1, 2019, to $7.00 billion by February 2, 2024. This represents a total increase of approximately 144% in the carrying amount of debt, characterized by two distinct periods of aggressive expansion.
- Debt Accumulation Patterns
- The growth of long-term obligations occurred in stepped increments rather than a linear progression. Following a period of relative stability between 2019 and 2020, a significant increase was observed in January 2021, where total obligations rose to $4.13 billion. After another period of stabilization through January 2022, a second and more pronounced surge occurred by February 2023, with the carrying amount peaking at $7.01 billion.
- Maturity Profile and Liquidity Shift
- A notable shift in the debt structure is evident in the final reporting period. From 2019 through 2023, the current portion of long-term obligations remained negligible or immaterial relative to the total debt. However, as of February 2, 2024, the current portion increased sharply to $768.6 million. This indicates a substantial amount of debt has moved into the short-term maturity window, increasing immediate refinancing or repayment requirements.
- Debt Composition Analysis
- For the majority of the period, the total carrying amount was comprised almost entirely of non-current obligations. By February 2, 2024, the composition shifted, with approximately 11% of the total long-term obligations now classified as current. Despite this shift in classification, the total carrying amount remained relatively flat between February 2023 and February 2024, suggesting that the increase in current obligations was a result of timing and maturity rather than new borrowing.
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Total Debt (Fair Value)
| Feb 2, 2024 | |
|---|---|
| Selected Financial Data (US$ in thousands) | |
| Total long-term obligations, including current portion (fair value) | 6,856,163) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 0.98 |
Based on: 10-K (reporting date: 2024-02-02).
Weighted-average Interest Rate on Debt
Weighted average borrowing rate: 4.49%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 4.25% | 749,770) | 31,865) | |
| 4.15% | 499,838) | 20,743) | |
| 3.88% | 599,840) | 23,244) | |
| 4.63% | 549,600) | 25,419) | |
| 4.13% | 499,763) | 20,615) | |
| 5.20% | 499,876) | 25,994) | |
| 3.50% | 951,240) | 33,293) | |
| 5.00% | 697,845) | 34,892) | |
| 5.45% | 998,479) | 54,417) | |
| 4.13% | 495,330) | 20,432) | |
| 5.50% | 299,712) | 16,484) | |
| Total | 6,841,293) | 307,399) | |
| 4.49% | |||
Based on: 10-K (reporting date: 2024-02-02).
1 US$ in thousands
2 Weighted-average interest rate = 100 × 307,399 ÷ 6,841,293 = 4.49%
Interest Costs Incurred
Dollar General Corp., interest costs incurred
US$ in thousands
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
The total interest costs incurred demonstrate a consistent and accelerating upward trajectory over the six-year period ending February 2, 2024. While costs remained relatively stable between 2019 and 2020, a significant escalation began in 2021 and intensified through 2024, resulting in a substantial increase in the overall cost of debt.
- Total Interest Cost Progression
- Interest costs incurred rose from 103,571 thousand US$ in 2019 to 339,281 thousand US$ in 2024, representing a total increase of approximately 227%. The most pronounced year-over-year growth occurred between 2023 and 2024, where costs surged by roughly 57%.
- Composition of Interest Costs
- The vast majority of these costs are recognized as interest expense. However, interest costs capitalized have shown a notable increase in the most recent period, rising to 12,500 thousand US$ in 2024 from a low of 100 thousand US$ in 2021. This suggests a recent increase in the volume of qualifying assets under construction or long-term investment activities.
- Analysis of Growth Phases
- The data reveals three distinct phases: a period of stability from 2019 to 2020, a primary inflection point in 2021 where costs increased by 45%, and a secondary acceleration phase beginning in 2023. The rapid rise in the final two years indicates a significant increase in either the total principal of debt held or a substantial rise in the effective interest rates applied to the company's obligations.
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Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
2024 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= 2,446,300 ÷ 326,781 = 7.49
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= 2,446,300 ÷ 339,281 = 7.21
An analysis of the interest coverage metrics reveals a significant reversal in the company's ability to service its debt over the six-year period ending February 2, 2024. Both measured ratios exhibit a synchronized trajectory, characterized by an initial period of growth followed by a sharp and accelerating decline.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- The adjusted ratio experienced a steady ascent from 20.42 in February 2019 to a peak of 23.62 in January 2021. Following this peak, a consistent downward trend emerged, with the ratio falling to 20.29 in 2022 and 15.40 in 2023. The most substantial contraction occurred between February 2023 and February 2024, where the ratio dropped precipitously to 7.21, representing a significant reduction in the margin of safety for debt obligations.
- Interest Coverage Ratio (without capitalized interest)
- The non-adjusted ratio followed a nearly identical pattern, rising from 21.18 in 2019 to a maximum of 23.64 in 2021. The subsequent decline mirrored the adjusted metric, decreasing to 20.45 in 2022 and 15.75 in 2023. By February 2024, the ratio reached its lowest point in the observed period at 7.49.
- Comparative Variance and Trend Analysis
- A minimal variance is observed between the ratio with capitalized interest and the ratio without capitalized interest across all periods. This indicates that the capitalization of interest has had a negligible impact on the overall interest coverage profile. The overarching trend shows that while the company maintained a very high coverage capacity through early 2021, the capacity has deteriorated rapidly over the last three fiscal years, with the most acute decline occurring in the most recent annual period.
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