Dollar General (DG) 1Q Preview - UBS

UBS analyst, Michael Lasser, is anticipating consistent results from Dollar General (NYSE: DG) in 1Q. After introducing its LT growth algorithm in 4Q, he expects DG to follow up with solid results. He is modeling a 2.5% comp in 1Q (vs. the consensus est. of 2.4%). It faces its most difficult comparison in '16 as it laps the 5.2% SSS from 1Q'15. Similar to WMT, DG has less discretionary mix than others in the space, which probably made its traffic look better than those that faced weather-sensitivity. Though, it probably was impacted a bit by food deflation.

Its comp should have been supported by the acceleration of its targeted labor investment in 3,100 stores (25% of its footprint). In 4Q, impacted stores moved inventory to the shelves in 1 day on average vs. the chain's 3 day average. This ought to improve in-stock levels & boost conversion.

The analyst forecasts an EPS of $0.96, which is ahead of the consensus estimate of $0.95.

No change to Buy rating or $93 PT which equates to 18x CY'17 EPS.

For an analyst ratings summary and ratings history on Dollar General click here. For more ratings news on Dollar General click here.

Shares of Dollar General closed at $81.62 yesterday.

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