The Exchange

Dollar General Hits Best Level Since IPO

The Exchange

Dollar General (DG) was having one of the best trading days since its shares returned to the market, hitting a new peak after the discount merchant's latest earnings surpassed estimates.

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Dollar General store
The Goodlettsville, Tenn., retailer was recently up 4.2% at $56.12 on volume that was much stronger than usual. That advance was putting the stock just outside the top 10 percentage-gaining days it's seen. Earlier in the session, it reached $57.42, the highest price it's recorded since it began trading again in November 2009.

Driving the climb was Dollar General's second-quarter results. The company earned $245 million, or 75 cents a share, in the second quarter. Before items, it had a profit of 77 cents, 3 cents ahead of estimates. Sales rose around 11% to $4.39 billion, a bit ahead of the $4.35 billion consensus forecast, and same-store sales increased 5.1%, exceeding the 4.2% projection on Wall Street. Customer traffic and the size of the average sale transaction were both higher.

For the full fiscal year, Dollar General still expects total sales to increase 10% to 11% from the prior year, with same-store sales up 4% to 5%. Adjusted earnings should be $3.15 to $3.22. Those ranges match the company's predictions following the first quarter, but the top end already had come down a few months ago from Dollar General's initial expectations.

Since coming public again, Dollar General had gained 137% as of Tuesday's close, approximating the climb of Family Dollar (FDO), but trailing Dollar Tree (DLTR). However, the last 12 months reveal only a 6% rise, reflecting a couple of disappointing forecasts. Thus far in 2013 though, Dollar General has overcome the most recent warning, issued in June, to post a 27% increase.

No doubt the discount retailer has reaped the benefits of a consumer base that's grown more cost-conscious since the recession. It sells a variety of household and pet goods, snacks, toys, some apparel and other everyday items. For the fiscal year that ended in January 2009, it had revenue of $10.5 billion, and as of February that year, it operated 8,414 stores. This year, it's projected to have roughly $17.7 billion in sales with 11,064 locations. Same-store sales have been up each year during its second public run, the lowest being last year's 4.7% growth.

Kohlberg Kravis Roberts bought Dollar General in 2007 and took it public again about two years later. KKR still owns 3.5% of the company, according to FactSet data detailing holdings as of June 30.

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