What to look for when Dollar General (DG) reports Q1 2024 earnings results

Shares of Dollar General Corporation (NYSE: DG) rose over 3% on Tuesday. The stock has dropped 31% over the past 12 months. The discount retailer is scheduled to report its first quarter 2024 earnings results on Thursday, May 30, before market open. Here’s a look at what to expect from the earnings report:

Revenue

Analysts are projecting revenue of $9.9 billion for Dollar General in Q1 2024. This compares to sales of $9.3 billion reported in the same period a year ago. In the fourth quarter of 2023, net sales decreased 3% year-over-year to $9.9 billion.

Earnings

Dollar General has guided for EPS of $1.50-1.60 in Q1 2024. Analysts are predicting EPS of $1.57 for the first quarter, which compares to EPS of $2.34 reported in Q1 2023. In Q4 2023, EPS fell 38% YoY to $1.83.

Points to note

Dollar General expects same-store sales to increase 1.5-2.0% in Q1 2024. In the fourth quarter, same-store sales rose 0.7%, driven by growth in customer traffic, partly offset by a drop in average transaction amount. Last quarter, same-store sales grew in the consumables category but declined across the seasonal, apparel, and home products categories.

In Q4, gross margin fell 138 basis points to 29.5%, mainly due to higher shrink and inventory markdowns, as well as a greater proportion of sales coming from the low-margin consumables category. As customers continue to battle inflation, the company expects the headwind to gross margin from sales mix to continue in 2024. Shrink is also expected to continue to impact margins in the first part of the year. These factors could take a toll on Q1 results.

Dollar General is expected to benefit from the investments it is making in its stores, including new openings, remodels and relocations. The expansion of fresh food options into more stores is expected to drive more yields. On the other hand, softness in the discretionary category could have an impact on the company’s pOpshelf stores, which comprise of mainly non-consumable product categories.