Nomura Securities Maintains a 'Neutral' on Dollar General (DG); Analysis of the DG Market

Nomura Securities maintains a 'Neutral' on Dollar General (NYSE: DG) price target of $42.00.

Nomura analyst, Aram Rubinson, said, "History teaches us not to under-estimate the power of new store formats. Although the DG Market concept is still evolving, this report attempts to determine whether it will look more like Wal-Mart’s (NYSE: WMT) successful Supercenter format or its less successful Neighborhood Market concept. DG operates 62 Markets currently and expects to open 40 next year. We are likely to hear a lot more about the format as 2012 develops. If DG Market were to produce $5.5m stores that accounted for 12% of the chain by 2020, it would sustainably add 2% to annual footage growth, 5% to sales growth, 2% to EPS growth and 100bp to ROIC, and if it produced $7.5m stores that reached 12% of the chain by 2020, it would sustainably add 2% to annual footage growth, 8% to sales growth, 7% to EPS growth and 650bp to ROIC. Our analysis employs many estimates, but DG Market offers a tangible opportunity for DG shareholders."

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 $40.50 yesterday.

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