Dollar General Surges 10% As Q2 Earnings Blew Estimates

Dollar General Surges 10% As Q2 Earnings Blew Estimates
August 30, 2019

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The shares of the American chain of variety stores Dollar General Corporation (NYSE: DG) rose 10.68% or $15.06 to close at $156.09 yesterday after the $36.43 billion enterprise easily surpassed the Street estimates for the second quarter of fiscal 2019. The company also upwardly revised its FY19 net earnings per share outlook and same-store sales growth forecast. Furthermore, Dollar General reaffirmed its FY19 net sales growth view.

Goodlettsville, Tennessee-based Dollar General reported second-quarter revenues of $6.981.75 billion, an increase of 8.4% from $6.443 billion in the comparable quarter last year. Analysts had anticipated Dollar General to post revenues of $6.90 billion in the recent quarter.

Net income for the quarter ended August 2, 2019, was $426.55 million, or $1.65 per share, compared with $407.24 million, or $1.52 per share in the quarter ended August 3, 2018.

Excluding legal expenses and other charges, adjusted net income for 2Q19 was $450.70 million or $1.74 per share, up from $407.20, or $1.52 per share in 2Q18. Analysts polled by Thomson Reuters’ anticipate Dollar General to post earnings of $1.57 per share on revenues of $6.90 billion. In the past four quarters, the company has surpassed EPS estimates twice. Same-store sales increased 4%, exceeding the 2.5% FactSet consensus.

Commenting on the results, Todd Vasos, Dollar General’s CEO, said: “We are pleased with our second-quarter results, driven by strong performance on both the top and bottom lines.”

Vasos also explained the reason behind the impressive performance: “Our results this quarter were fueled by solid execution across many fronts, including category management, merchandise innovation, store operations, and continued progress with our strategic initiatives. In addition, we remained focused on disciplined cost control, which culminated in another quarter of strong earnings growth. Given our first-half performance and expectations for the remainder of the year, we are raising our full-year financial guidance.”

Segment-wise:

  • Consumables revenue grew 8.80% y-o-y to $5.428 billion.
  • Seasonal sales were $854.09 million, up 7.80% on a y-o-y basis.
  • Home products revenue increased 8.7% to $375.07 million.
  • Apparel sales grew 2.20% to $324.59 million.

Going forward, the Dollar General now anticipates net sales growth of roughly 8%, compared with the 7% growth forecast earlier. Furthermore, the company now expects same-store sales growth in the low-to-mid 3% range. Previously, the company was anticipating same-store sales growth of roughly 2.5%.

Dollar General now forecasts FY19 earnings in a range of $6.36 to $6.51 per share and adjusted earnings in a range of $6.45 to $6.60 per share. Earlier, the company anticipated earnings in a range of $6.30 to $6.50 per share.

The Wall Street Consensus estimate currently stands at 6.47 per share on net sales growth of 7.4% to $27.52 billion for fiscal 2019.

Notably, the company reaffirmed its plans to move forward with nearly 2,075 real estate projects in fiscal 2019, including remodeling of 1,000 mature stores, the opening of 975 new stores and relocation of 100 stores.

Dollar General also anticipates share repurchases worth roughly $1.0 billion and capital expenditures of between $775 million and $825 million. Earlier this week, the company’s board approved a quarterly cash dividend of $0.32 per share payable on or before October 22nd, 2019.

The Q2 earnings beat and upwardly revised FY19 earnings and same-store sales view are expected to keep the stock bullish in the short-term.

Technically, the stock has formed a bullish gap, as shown in the image below. Additionally, the ultimate oscillator is in the bullish zone. As a result, we can expect the stock to appreciate further in the short-term.

dg - techncial analysis - 30th Aug 2019

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Janine

Janine

Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be


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