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8:03 am Dollar General Pleases with First Quarter Results

Deep value retailer Dollar General (DG 72.81) reported its first quarter results this morning and they were pleasing on most fronts.  Sales and same-store sales were a bit light of expectations, but still comfortably positive for the period.

The specifics of the report showed net sales rising 8.8% in the quarter to $4.92 billion and same-store sales increasing 3.7%.  Analysts' average expectation for same-store sales was closer to 4.0%.  

The retailer's gross margin expanded by 45 basis points to 30.5% of sales, aided by higher initial inventory markups and lower transportation costs.  Despite higher incentive compensation, Dollar General's operating margin rate jumped 31 basis points to 8.71%.  Diluted earnings per share (EPS) of $0.84 were up 17% from the year-ago period and ahead of estimates.

Dollar General enjoyed solid growth in each of its sales categories, with its core consumables segment logging 9.0% growth versus the same period a year ago.  The non-consumable home products, seasonal, and apparel categories registered sales gains of 6.9%, 8.3%, and 9.5%, respectively.

The company';s outlook for fiscal 2015 calls for total sales to increase 8% to 9%, same-store sales to increase 3.0% to 3.5%, and diluted EPS to be approximately $3.85 to $3.95.  The midpoint of the EPS guidance range is slightly below analysts' average expectation, but up 11% from fiscal 2014.

Shares of DG, which are up 3.0% year-to-date and 34% over the last 52 weeks, are trading nearly 3.0% higher in pre-market action.

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