Dollar General (DG) Provides Preliminary Q4 Results, Cuts View
Shares of Dollar General Corporation DG declined 3.6% during the trading session on Feb 24. The stock came under pressure following the company’s lower-than-expected preliminary fourth-quarter fiscal 2022 results. Management attributed the soft performance to below-than-anticipated sales and higher-than-anticipated inventory damages due to the winter storm Elliott. This compelled the discount retailer to trim the earnings view.
Dollar General informed that fourth-quarter same-store sales came below management’s expectation despite continued market share gains in sales of both consumable and non-consumable products. The metric grew 5.7% compared to the company’s projection of an approximately 6-7% increase. The softer-than-expected performance was due to lower-than-anticipated same-store sales results during December, primarily due to the storm.
Same-store sales in November and January increased 6.7% and 6.5%, respectively, and were within the company’s earlier provided guidance range. Meanwhile, the metric increased 4.5% during December.
Dollar General said that same-store sales for fiscal 2022 grew 4.3%. The company earlier guided same-store sales toward the upper end of the range of 4-4.5%.
Management now foresees fourth-quarter earnings in the band of $2.91-$2.96 per share, down from the prior view of $3.15-$3.30. The company estimates fiscal 2022 earnings per share growth between 4.5% and 5.0%, down from its prior expectation of an approximately 7-8% increase.
Apart from updating about the upcoming quarterly results, Dollar General also provided a glimpse of fiscal 2023.
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The company envisions same-store sales growth in the band of 3-3.5% for the next fiscal. The company also guided earnings per share growth in the range of about 4-6%. The earnings view includes the estimated negative impacts of roughly three percentage points due to higher interest expenses in fiscal 2023 and about four percentage points due to lapping the 53rd week in fiscal 2022.
The earnings growth projection was well below analysts’ expectations. We note that the current Zacks Consensus Estimate for fiscal 2023 is pegged at $12.14, suggesting a year-over-year increase of 11%. The consensus mark is likely to witness a downward revision in the coming days following management’s recent commentary.
Shares of this Zacks Rank #3 (Hold) company have fallen 15.6% in the past three months compared with the industry’s decline of 5.7%.
Bottom Line
Of late, product cost inflation, a tight labor market and supply-chain issues are some of the headwinds that players in the industry have been encountering. This has been putting pressure on margins and the bottom line. Meanwhile, soaring prices have squeezed consumers’ disposable income, compelling them to rein in spending. As a result, quite a few retailers juggled with excess inventory.
3 Stocks Looking Red Hot
Here we have highlighted three better-ranked stocks, namely Costco COST, Arhaus ARHS and Albertsons Companies ACI.
Costco, which operates membership warehouses, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 9.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Costco’s current financial-year revenues and EPS suggests growth of 7.3% and 8.6%, respectively, from the year-ago reported figure. Costco has a trailing four-quarter earnings surprise of 3.7%, on average.
Arhaus, which operates as a lifestyle brand and premium retailer in the home furnishing market, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 16.1%.
The Zacks Consensus Estimate for Arhaus’ current financial-year revenues and EPS suggests growth of 54% and 26.1%, respectively, from the year-ago reported figure. Arhaus has a trailing four-quarter earnings surprise of 112%, on average.
Albertsons Companies, which operates food and drug stores in the United States, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 5.4%.
The Zacks Consensus Estimate for Albertsons Companies’ current financial-year revenues and EPS suggests growth of 7.8% and 6.5%, respectively, from the year-ago reported figure. Albertsons Companies has a trailing four-quarter earnings surprise of 17.2%, on average.
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Dollar General Corporation (DG) : Free Stock Analysis Report
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