Dollar General Updates Guidance Following Mixed Q3 Results

By Paul Ausick Updated Jan 13, 4:32PM EST · Published Dec 3, 7:40AM EST

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Dollar General Updates Guidance Following Mixed Q3 Results — © courtesy of Dollar General Corp.

Dollar General Corp. (NYSE: DG) reported third-quarter 2015 results before markets opened Thursday. The discount retailer posted quarterly diluted earnings per share (EPS) of $0.88 on revenues of $5.07 billion. In the same period a year ago, Dollar General reported EPS of $0.78 on revenue of $4.72 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.87 and $5.09 billion in revenue.

The company said that same-store sales rose 2.3% in the quarter, driven by increases in both customer traffic and average transaction value. Net sales rose 7.3%, primarily due to the impact of new stores. Sales rose in all merchandise categories, with consumables growing at a higher rate, driven by sales of candy and snacks, tobacco products and perishables. Within non-consumables, the most significant growth was due to seasonal items, sundries, hardware, housewares and women’s clothing.

In its outlook statement, Dollar General put some limits on prior guidance. Total sales are expected to increase 8%, rather than a prior estimate of 8% to 9% over the 2015 fiscal year, with same-store sales now expected to increase 2.5% to 2.8%, below the prior estimate of 3% to 3.5%. Adjusted and unadjusted operating profit for 2015 is expected to increase 8% over 2014 adjusted operating profit. Adjusted diluted EPS for the fiscal year is now forecast in a range of $3.88 to $3.93, compared with the prior estimate of $3.85 to $3.95. Fourth-quarter diluted EPS is now forecast at $1.23 to $1.28.

Consensus estimates for the full fiscal year call for EPS of $3.92 on revenues of $20.42 billion. Analysts were looking for fourth-quarter EPS of $1.27.

The company’s CEO, Todd Vasos, said:

As we plan for 2016, we are adopting a zero-based budgeting process to reinforce our commitment as a low cost operator to better serve our consumers with the everyday low prices they know and trust at Dollar General. Looking forward, we have continued confidence that we are well-positioned for sustainable growth and creation of shareholder value.

Dollar General repurchased 3.8 million shares of common stock in the third quarter at a cost of $275 million, and it has bought back 13.4 million shares at a cost of $1 billion so far in the current fiscal year. The company’s board authorized an additional $1 billion for share buybacks, and the repurchase authorization now totals $1.2 billion, with no expiration date.

Shares were up 1% in the premarket session Thursday, at $66.00 in a 52-week range of $59.75 to $81.42. The consensus price target on the stock is $81.82.

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About the Author Paul Ausick →

Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.