Categories Analysis, Retail

Earnings Preview: Dollar General to post upbeat Q3 earnings

Discount store chain Dollar General (DG) is set to post its third-quarter earnings on Tuesday before the bell. The company’s results will be benefited by the mature store base contributions and strong new stores performance, as well as higher same-store sales growth.

Analysts, on average, expect Dollar General to report earnings of $1.26 per share on revenue of $6.38 billion for the third quarter. In comparison, during the previous year quarter, the company posted a profit of $0.93 per share on revenue of $5.90 billion. Majority of the analysts recommended a “strong buy” or “buy” rating on the stock with an average price target of $117.75.

For the third quarter, the company’s bottom line is expected to be benefited by the contributions from its mature store base and strong performance of its new stores. The top line is likely to be driven by the sales contributions from new stores and same-store sales growth. This top line growth will partially offset store closures impact. Higher average transaction amount and customer traffic could drive the same-store sales higher.

For the second quarter, the company posted a 38% jump in earnings helped by robust performance from its current and new stores. Net sales grew by 10.6%. Dollar General repeated the bullish trends set by its rivals including TJX Companies (TJX), Ross Stores (ROST), and Kohl’s (KSS), all reported stellar results for the second quarter.

Dollar General drops despite beating Q2 estimates

Same-store sales for the second quarter rose by 3.7% from the previous year quarter, as the positive results in the consumables, seasonal and apparel categories, partially offset the sales declines in the home category.

For the full year 2018, the company had expected net sales growth in the range of 9% to 9.3% and same-store sales growth in the mid-to-high 2% range. Earnings are anticipated to be in the range of $5.95 to $6.15 per share. Capital expenditures are predicted to be $725 million to $800 million. For the year, Dollar General planned to open about 900 new stores, remodel 1,000 stores and relocate 100 stores.

Similar to the previous quarter, investors are awaiting Dollar General to repeat the bullish trends of its rivals including Ross Stores and Kohl’s for the third quarter. In contrast, TJX Companies posted weaker than expected results for the third quarter. There is a high possibility among the investors of Dollar General exceeding the analysts’ expectations.

Shares of Dollar General opened lower on Thursday but turned course to the green territory, and is trading higher in the mid-afternoon. The stock has risen over 19% in the year so far and over 27% in the past year.

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