Dollar General Q2 Earnings Beat Due to New Stores, Increased Traffic

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Dollar General Corp. (NYSE: DG) released its fiscal second-quarter earnings report before the markets opened on Thursday. The company said that it had $1.10 in earnings per share (EPS) and $5.83 billion in revenue, which compares with consensus estimates from Thomson Reuters of $1.09 in EPS and revenue of $5.8 billion. In the same period of last year, the retailer posted EPS of $1.08 and $5.39 billion in revenue.

For the quarter, same-store sales increased 2.6%, mainly attributable to increases in average transaction amount and customer traffic. Same-store sales increases were driven by positive results in the consumables and seasonal categories, partially offset by negative results in the home products and apparel categories.

On June 12, 2017, Dollar General finalized the purchase of stores spun off due to the Dollar Tree and Family Dollar merger, resulting in a net increase of roughly 285 new stores in 35 states. The company plans to convert these store sites to the Dollar General banner by the end of November this year.

In terms of outlook for the full fiscal year, the firm increased its EPS guidance to $4.35 to $4.50, from the previous range of $4.25 to $4.50. At the same time, management also believes that its net sales will increase by 5% to 7% and that same-store sales growth of slightly positive to an increase of 2%.

Consensus estimates call for $4.50 in EPS and $23.36 billion in revenue for the full year.

On the books, Dollar General’s cash and cash equivalents totaled $214.2 million at the end of the quarter, up from $187.9 million at the end of the previous fiscal year.

Todd Vasos, CEO of Dollar General, commented:

I am pleased with our results at this point in the year. For the quarter, same-store sales grew 2.6%, driven by an increase in our average transaction amount and, importantly, positive customer traffic. In a dynamic retail and consumer landscape, we continue to make targeted investments in our business to execute on our focused strategic and operating initiatives which we believe will contribute to sustainable improvement over time.

Shares of Dollar General closed Wednesday at $76.73, with a consensus analyst price target of $81.48 and a 52-week range of $65.97 to $80.67. Following the release, the stock was down over 4% at $73.09 in early trading indications Thursday.