- Truist Securities analyst Scot Ciccarelli reiterated Hold Rating on Dollar General Corp. DG and a price target at $214.
- The analyst believes DG's key initiative is to drive comparable sales growth of 300-350bps in 2023 and EBIT growth over time. Ciccarelli expects a positive impact of around 200 bps from store growth/store maturation and around 100-150 bps from DG Fresh, NCI, and DG Media. The analyst projects share repurchase to decline to around $500 million in 2023 vs. the recent run rate level of around $2.5 billion due to higher leverage.
- Ciccarelli sees increasing challenges from the core lower-income consumer base for the company due to higher private label sales, $1 item growth, and smaller basket size.
- Although management has not cited any major impact from this, it has disclosed the roll-off of pandemic-related SNAP benefits across several states and lower tax refunds. The analyst sees this as a matter of concern in the near term.
- Dollar General reinstated its outlook for comparable sales growth of 3.0%-3.5% in 2023, with sales in the second half slightly better than in the first half.
- DG anticipates profit growth to be skewed towards the second half, mainly on improvement in the supply chain. Management expects the positive impact of SKU inflation on comparable sales to continue in 2023, albeit at a moderate level.
- The company has previously disclosed an additional investment of $100 million in labor hours for 2023 and expects extra hours to enhance customer service and store standards. The analyst anticipates more such investments in the future in case of productivity improvement from this initiative.
- Price Action: DG shares are trading lower by 0.81% at $212.46 on the last check Wednesday.
- Photo via Wikimedia Commons
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