Nine months after discounter Dollar General (DG) acknowledged its involvement in an SEC investigation, in mid-September the discount retailer initiated a search to replace CEO Cal Turner, Jr. According to DG spokesperson Andrea Ewin Turner, this is the first time the company is looking outside the Turner family to name a successor.
In 2001, DG announced a series of accounting errors, the most notable of which was an incorrect evaluation of synthetic leases. In January, DG resolved the miscalculation by restating 1998-2000 net earnings by a total of 30 cents per share; the company also settled a $162 million class action lawsuit from investors. The SEC is examining whether or not the synthetic lease and other mistakes were actually the work of fraud, and its inquiry is ongoing.
Citing that DG has been “very straightforward with the Street since this occurred — and Turner did give back some bonuses earned on those numbers that turned out to be incorrect,” Michael Baker, a senior analyst with Deutsche Bank Securities, Inc., states that Turner's resignation is not related to the company's accounting gaffe. “There may have been some loss of major credibility, but it may make sense for a new CEO anyway,” he says. Turner, 62, will continue as the company's chairman, a position he has held since 1989.
Nor has it had a noticeable effect on shoppers. Dollar General opened its 6,000th store on September 27 in Bowling Green, Ky., and same-store sales increased 5% in September. “Our investor public is different from our consumer public,” says spokesperson Turner.
Baker adds, “The sales trends are great, consumers really do value the basic consumables that they sell. So the concept clearly works, and we think the company is clearly making the right steps to improve their infrastructure and operations.”