Should Dollar General Get More Credit for Q3 Earnings?

Dollar General Corp. (NYSE: DG) reported its fiscal third-quarter financial results before the markets opened on Thursday. The discount chain said that it had $1.42 in earnings per share (EPS) and $6.99 billion in revenue in the fiscal second quarter, which compares with consensus estimates of $1.38 in EPS and $6.92 billion in revenue. The same period of last year reportedly had $1.26 in EPS and $6.42 billion in revenue.

During the latest quarter, Dollar General net sales increased 8.9% year over year. This net sales increase included positive sales contributions from new stores and growth in same-store sales, modestly offset by the impact of store closures.

At the same time, same-store sales increased 4.6%, driven by increases in both average transaction amount and customer traffic. Same-store sales in the third quarter included growth in the consumables, seasonal, home and apparel categories.

Looking ahead to the 2019 fiscal full year, the company expects to see EPS in the range of $6.55 to $6.65 with net sales growing roughly 8%, and same-store sales increasing in the mid-to-high 3% range. Consensus estimates call for $6.61 in EPS and $27.67 billion in revenue.

Todd Vasos, Dollar General’s CEO, commented:

We are pleased with another quarter of strong performance across the business. The quarter was highlighted by our best customer traffic and same-store sales increases in nearly five years, as well as double-digit growth in both operating profit and diluted EPS. We continue to execute well on many fronts, while maintaining our focus on delivering value and convenience for our customers. As a result of our performance through the first three quarters of 2019 and outlook for the fourth quarter, we are raising our full-year financial guidance as we work to finish a strong year.

Shares of Dollar General closed Wednesday at $153.55, in a 52-week range of $98.08 to $166.98. The consensus price target is $169.68. Following the announcement, the stock was up about 3% at $158.65 in early trading indications on Thursday.