Dollar General (NYSE: DG) Q3 2018 earnings: discount store cuts outlook on disaster impact

Discount-store chain Dollar General (DG) saw third-quarter earnings jump 35.5% to $1.26 per share in line with analyst estimates. Net sales jumped 8.7% to $6.4 billion on a 2.8% rise in same-store sales, according to the results posted on Tuesday before the bell.

In the quarter, Dollar General board of directors declared a cash dividend of $0.29 per share.

Majority of the analysts recommend a “strong buy” or “buy” rating on the stock with an average price target of $117.75.

Operating profit for the third quarter of 2018 grew 5.9% to $442.1 million. The effective income tax rate in the third quarter of 2018 was 20.0% compared to 35.8% in the third quarter of 2017. As of November 2, 2018, total merchandise inventories, at cost, were $3.98 billion compared to $3.60 billion as of November 3, 2017, an increase of approximately 4.0% on a per store basis.

“As a result of the third quarter hurricanes and other disasters, we will record greater-than-anticipated expenses in the second half of 2018,” said John Garratt, Dollar General’s CFO. “In total, the impact to third quarter EPS was an estimated $0.05 per diluted share and we expect to see an additional estimated $0.04 impact on our fourth quarter diluted EPS. We have adjusted our full-year outlook to reflect the estimated $0.09 impact of these events, ongoing transportation cost pressures and year-to-date results, ” he added.

For fiscal 2018, Dollar General expects net sales growth to be about 9%, generating diluted EPS of $5.85-$6.05; and a cash benefit of approximately $300 million as a result of the TCJA.

The company also expects share repurchases for the fiscal year to be a minimum of $850 million, with Capex of $725-$775 million.

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