Retail

Earnings Previews: Dollar General, Kroger

Three firms we covered in earlier previews reported earnings results before markets opened Thursday. Solar cell and module maker JinkoSolar missed on revenues but beat profit estimates, while social media platform Hello World (aka, Momo) beat on both. Apparel retailer Chico’s FAS also beat on both. All three traded lower, however, shortly after Tuesday’s opening bell.

After markets close Tuesday, Hewlett Packard Enterprise and Salesforce.com will report earnings. We did not preview any of the handful of companies scheduled to report results Wednesday morning.

We already have posted our previews of three software companies that will report quarterly results after markets close Wednesday: CrowdStrike, Snowflake and Splunk.

Here’s a look at two retailers set to report quarterly results before markets open on Thursday.

Dollar General

Since rival Dollar Tree reported results last week and announced that it would begin pricing its goods at $1.25, shares of Dollar General Corp. (NYSE: DG) have only dropped by less than 1%. Over the past 12 months, Dollar General stock has gained about 3.3%, while Dollar Tree is up nearly 24% in the same period. But virtually all that gain came since mid-November, and the bulk of that came on the announced price increase. What will Dollar General do?

Analysts are firmly bullish on the stock. Of 27 brokerages covering the off-price retailer, 22 have rated the stock a Buy or Strong Buy, and three more rate the shares at Hold. At a recent price of around $223.60 a share, the upside potential based on a median price target of $252 is 12.7%. At the high price target of $272, the upside potential is 21.6%.

Third-quarter revenue is forecast at $8.49 billion, which would be down nearly 2% sequentially but 3.5% higher year over year. Adjusted earnings per share (EPS) are forecast at $2.01, down 25% sequentially and 13% lower year over year. For fiscal 2022 ending in January, Dollar General is currently expected to report EPS of $10.21, down 3.8%, on sales of $34.24 billion, up 1.5%.

Dollar General’s share price to earnings multiple for fiscal 2022 is 21.9. For fiscal 2023, the multiple to estimated EPS of $11.23 is 19.9, and for 2024, it is 17.9 times estimated EPS of $12.49. The stock’s 52-week range is $173.50 to $239.35. The company pays an annual dividend of $1.68 (yield of 0.75%). Total shareholder return for the past year is 3.1%.

Kroger

Grocery store operator Kroger Co. (NYSE: KR) has added about 33% to its share price over the past 12 months. Competitor Albertson’s saw its stock price jump by 127% over the past 12 months and that’s the kind of performance Kroger would like to see.

Kroger is expanding into Florida with a delivery-only service and no physical stores. This could be a big win for Kroger in a state where there are lots of retired people who might welcome the service and plenty of snowbirds who’d rather sit in the sun than troop off to a chore they’ll have to return to soon enough. The first distribution center, near the Florida-Georgia border, recently opened and will be a hub to serve customers within a 90-mile radius.

Of 27 analysts covering the stock, 15 have a Hold rating on the shares. The other 12 are evenly divided by Buy/Strong Buy and Sell/Strong Sell ratings. At a share price of around $42.30, the upside potential based on a median price target of $43 is about 1.7%. At the high price target of $54, the upside potential is 27.7%.

Third-quarter revenue is forecast at $31.19 billion, down about 1.6% sequentially and up nearly 5% year over year. Adjusted EPS are tabbed at $0.67, down 16.6% sequentially and 5.6% year over year. For the 2022 fiscal year ending in January, Kroger is expected to post EPS of $3.33, down 4.1%, on sales of 135.82, up 2.5%.

Kroger’s share price to earnings multiple for fiscal 2022 is 12.7. For fiscal 2023, the multiple to estimated EPS of $3.26 is 12.9, and for 2024, it is 12.8 times estimated EPS of $3.29. The stock’s 52-week range is $30.35 to $47.99. The company pays an annual dividend of $0.84 (yield of 1.98%). Total shareholder return for the past year is 30.6%.

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