Is the Reopening Trade Leaving This Major Retailer Behind?

Dollar General Corp. (NYSE: DG) was one of the last retailers to report earnings for the fiscal first quarter, and while most retailers seemingly have recovered, this variety store chain is lagging. The prospect of the reopening trade appears to have been lifting all boats, but this has not been so for Dollar General. Note that the stock is currently lower than where it was last April, at the height of the pandemic panic.

The discount retailer said that it had $2.62 in earnings per share (EPS) on $8.4 billion in revenue, while consensus estimates had called for $2.72 in EPS on revenue of $8.3 billion. The same period of last year reportedly had EPS of $2.10 and $7.16 billion in revenue.

The net sales increase of 17.6% included positive sales contributions from new stores and growth in same-store sales. Same-store sales increased 12.7% year over year, driven by an increase in average transaction amount, partially offset by a decline in customer traffic. Same-store sales increased in each of the consumables, seasonal, home products and apparel categories, with the largest percentage increase in the home products category.

The company believes consumer behavior driven by COVID-19 had a significant positive effect on net sales and same-store sales. However, Dollar General issued guidance that was not very impressive.

Looking ahead to the 2022 fiscal full year, the company expects to see net sales in the range of a 2% decline to flat, same-store sales declining 4% to 6% and EPS in the range of $8.80 to $9.50. Consensus estimates call for $10.08 in EPS on $34.09 in revenue for the full fiscal year.

Excluding Thursday’s move, Dollar General stock had underperformed the broad markets with a decline of about 11% year to date. In the past 52 weeks, the share price was up closer to 21%.

Dollar General stock traded down 5% to $177.68 on Thursday, in a 52-week range of $135.04 to $225.25. The consensus price target is $238.68.