Dollar General Stock Takes Off on Earnings and Upbeat Guidance

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Dollar General on Thursday raised its fiscal-year financial forecasts, unlike many other retailers, and beat analysts’ quarterly earnings estimates.

The discount chain reported fiscal first-quarter earnings of $2.41 a share, beating the consensus view on Wall Street for $2.32 a share and above management’s prior guidance, according to FactSet. Sales hit a total of $8.8 billion, again beating expectation of $8.71 billion. Same-store sales, or sales at stores open for at least 12 months, declined by just 0.1% vs. predictions of 1.2% for the April quarter.

The outlook for the fiscal year was more important for the stock than the quarterly numbers.

Dollar General

raised its same-store sales estimate to predict growth of 3% to 2.5%, while its call on net sales went to to growth of 10% to 10.5% for the fiscal year ending in January 2023. Analysts were expecting sales growth of 9.3% and a 2.3% increase in same-store sales growth. In mid March, the retailer predicted net sales would grow by 10% to $37.64 billion while same-store sales were expected to grow by 2.5%.

Wall Street had expected management to scale back its forecasts. Rupesh Parikh, analyst at

Oppenheimer
,
had thought cost pressures would make Dollar General cut its guidance but it was “clearly much better than expectations in our investor conversations. DG management executed quite well during the quarter,” he said in a note.

Parikh raised his target for the stock price to $240 from $230, continuing to rate the shares at Outperform. “When consumers dollars get stretched, we expect them to continue shopping at Dollar General,” Parikh said, prior to the earnings release. Oppenheimer lists Dollar General as a top pick.

The stock (ticker: DG) soared 16% to $225.80 on Thursday, a gain that would the biggest on record for the company if it is sustained through the close. Dollar General has declined 4.2% this year, while the S&P 500 is down 15.7%.

Unlike other big players like Walmart (WMT) and Target (TGT), Dollar General swam against the tide and did not give investors disappointing guidance, despite issues such as inflation and supply-chain disruptions.

Dollar General fell 2.8% after Walmart reported its results on May 17, losing 11% the next day in response to Target’s numbers, although it had more or less regained the lost ground by Wednesday.

Write to Karishma Vanjani at [email protected]