Earnings Preview: Dollar General (DG) likely to report mixed Q2 results

Discount store chain Dollar General Corporation (NYSE: DG) had a modest start to fiscal 2024, with margins coming under pressure from cautious consumer spending in the first quarter, despite stable sales of essentials. The retailer will report second-quarter results on August 29, before markets open.

Shares of Dollar General have lost a dismal 23% in the past five months, and the downtrend continued in the run-up to the earnings report. The stock price has more than halved in the past two years.

Q2 Report Due

The company is expected to report earnings of $1.80 per share and sales of $10.38 billion when it releases second-quarter results next week. In the comparable quarter of 2023, it earned $2.13 per share on net sales of $9.8 billion. The Q2 report is expected on Thursday, August 29, at 6:55 am ET. It is worth noting that in the trailing three quarters, both earnings and sales beat estimates.

While sales of consumables increased in recent quarters, the demand for discretionary items declined reflecting customers’ concerns about inflation and economic uncertainties. The current trend indicates that Dollar General’s competitive prices will continue to attract customers who are on a budget.

From Dollar General’s Q1 2024 earnings call:

“We continue to feel very good about our pricing position relative to competitors and other classes of trade. And our value proposition presents significant opportunity for ongoing growth among a wide range of customers. Looking ahead, we expect value to continue to be the most important consideration for customers in multiple income ranges. We know that our customers need us even more when they face economic challenges, and we are well-positioned to help them stretch their dollar.”

Q1 Sales Up

In the first three months of fiscal 2024, the company reported higher net sales but experienced a sharp fall in profit, continuing the trend seen in the previous quarters. First-quarter sales rose 6% year-over-year to about $10 billion while earnings plunged 29% to $363.3 million or $1.65 per share. Same-store sales growth accelerated during the quarter, continuing their recovery from the weakness experienced in the past year.

Anticipating the momentum to continue, the company sees 2-2.7% growth in full-year same-store sales. It expects to earn $6.80-7.55 per share in fiscal 2024, reflecting an estimated 6-6.7% sales growth.

In the past three months, DG has mostly traded below its 52-week average. On Thursday, the stock opened at $123.71 and traded lower during the session.