Dollar General (DG) Shares Soar 14% on Raised Sales Outlook, Analyst Says Results Should Calm Fears

May 26, 2022 10:06 AM EDT
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Price: $246.76 -0.46%

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Dollar General (NYSE: DG) shares are up 14% today after the company delivered solid results and raised its sales guidance.

DG reported better-than-expected Q1 EPS of $2.41, compared to $2.82 in the year-ago period and above the analyst consensus of $2.31 per share. Q1 net sales came in at $8.75 billion, up 4.2% YoY and slightly above the estimated $8.71 billion.

“Despite ongoing headwinds due to supply chain pressures and heightened inflation, we remained focused on controlling what we can control and delivered solid financial results, which exceeded our expectations for sales and EPS for the quarter,” DG said in a statement.

Comparable sales were down 0.1% in the quarter, while analysts were expecting a decline of 1.45%. DG reported a gross margin of 31.3%, compared to 32.8% in the year-ago period and analyst expectations of 31.1%.

“As a result of our strong topline performance and current expectations for the remainder of the year, we are raising our net sales and same-store sales guidance for fiscal 2022.”

Looking ahead, DG expects FY 2023 sales growth in the range of 10% to 10.5%, compared to its previous forecast of 10% growth. The company said it still sees EPS growth in the range of 12% to 14%.

Dollar General reiterated and raised some of its forecasts in spite of the challenging macroeconomic environment due to record high inflation and supply chain constraints.

Citi analyst Paul Lejuez saw results as “solid” and expects a positive reaction from shares given “market nervousness.”

“In-line quarter and F22 EPS guidance reaffirmed should calm fears that developed after misses on the cost line at WMT and TGT… As expected the company faced some margin pressures given the inflationary and freight environment but overall mgmt was able to navigate these challenges,” Lejuez told clients.

Telsey Advisory Group analyst Joseph Feldman also weighed in positively.

“Like most retailers, Dollar General is facing pressures from lapping the US government stimulus and elevated costs. That said, we expect the business to improve as the year progresses, as consumers continue to increase reliance on Dollar General in this more challenging economic environment... We continue to expect Dollar General's solid performance to be driven by new stores and remodels and a number of initiatives, including the expansion of cooler doors, DG Fresh supply chain upgrades, Fast Track inventory/labor management, and the expansion of non-consumables initiatives,” Feldman said.

By Senad Karaahmetovic



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