Zinger Key Points
- Analysts express mixed views on Dollar General's Q3 results, with some upgrading the stock despite competitive pressures.
- Dollar General's "Back-to-Basics" strategy shows early success, but competitive environment impacts long-term growth projections.
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Dollar General Corporation DG shares are trading higher Friday after the company reported third-quarter adjusted earnings per share of 89 cents, missing the consensus of 94 cents.
The discount retailer’s EPS is down 29.4% year-over-year. It now expects 2024 net sales growth of approximately 4.8% to 5.1%, compared to its previous expectation of roughly 4.7% to 5.3%.
Here are the analysts’ takes on the earnings results:
- Goldman Sachs analyst Kate McShane reiterated the Buy rating, lowering the price objective to $104 from $122.
- Bank of America Securities analyst Robert F. Ohmes upgraded Dollar General from Underperform to Buy, with a price forecast of $95.
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McShane raised the fiscal year 2024 EPS estimate by 0.9% to $5.79. This reflects lower interest expenses from paying down a $750 million note.
The fiscal year 2025 and fiscal 2026 EPS estimates were lowered by 6.8% and 7.4%, respectively. This was due to higher SG&A growth and expected return of incentive compensation.
Overall, the analyst notes that Dollar General saw small wins this quarter, including positive traffic, monthly comps, larger basket sizes, discretionary growth, and share gains with higher-income consumers.
Ohmes upgraded the stock, citing early success in its “Back-to-Basics” strategy, including improved inventory, higher in-stock levels, better customer satisfaction, and strong merchandising.
Ohmes also noted SKU reductions, a refreshed sorting process, and the launch of e.l.f. Beauty, Inc. ELF products as factors supporting growth and profitability in 2025.
The analyst sees benefits from inventory rightsizing, with overall and NC inventory down 7% and 9% per store, respectively, along with plans for 2K full store and 2.25K “Project Elevate” remodels, supporting comps of 6%-8% and 3%-5%, respectively.
Price Action: DG shares are trading higher by 2.93% to $81.96 at last check Friday.
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