Revenue
Earnings
The consensus target for Q3 2024 earnings per share is $0.94, which represents a decline of 25% from the year-ago quarter. In Q2 2024, EPS decreased 20% to $1.70.
Points to note
Dollar General’s core customers, who contribute to the majority of its sales, come mostly from low-income households and they remain under pressure in an inflationary environment. They, along with middle and high income customers, continue to seek value in their purchases and are on the lookout for more promotions and discounts.
DG has been seeing a rise in promotional activity, which has been putting pressure on sales and gross margins. The company believes this trend is likely to continue through the year. If so, it may have pressured results in Q3.
Last quarter, DG saw same-store sales inch up by 0.5%, helped by a 1% growth in traffic, partly offset by a decline in average transaction amount. The majority of sales continues to come from the consumables category while the discretionary category continues to see softness. The shift towards low-margin consumables has taken a toll on gross margins.
Another factor impacting margins is shrink, which continues to be a meaningful headwind for the company. In Q2, gross margin fell 112 basis points to 30%, due to higher discounts, a larger portion of sales coming from consumables, and higher shrink. Higher promotional markdowns and sales mix pressure are expected to continue to weigh on margins, which does not bode well for Q3, while various actions being taken by the company are anticipated to help in mitigating the impact from shrink.