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Dollar General (DG) Q2 Earnings in Focus: Factors to Watch

Dollar General Corporation DG is likely to register a decline in the top line when it reports second-quarter fiscal 2021 results on Aug 26, before the market opens. The Zacks Consensus Estimate for revenues is pegged at $8,557 million, indicating a decline of 1.5% from the prior-year quarter.

The bottom line of this discount retailer is also expected to decrease year over year. The Zacks Consensus Estimate for second-quarter earnings has been stable at $2.57 over the past 30 days. The figure suggests a decline from $3.12 reported in the year-ago period.

The company has a trailing four-quarter earnings surprise of 18.1%, on average. In the last reported quarter, this Goodlettsville, TN-based company outperformed the Zacks Consensus Estimate by a margin of 31.8%.

Key Factors to Note

Dollar General may have encountered tough year-over-year comparisons in sales, as COVID-19 benefits are lapped. Industry experts believe that lower at-home consumption activities and a drop in pantry-loading trends might have weighed on the company’s top-line performance in the quarter to be reported. Management had also cautioned that there remains significant uncertainty related to the severity and duration of the ongoing pandemic, and its impact on the economy, consumer behavior and the business.

On its last earnings call, management informed that from the end of first quarter through May 23, same-store sales declined approximately 7%, as a result of tough year-over-year comparison.

While Consumables category is likely to have witnessed a decline on a year-over-year basis, categories such as Seasonal, Home products and Apparel might have performed well, thanks to budding demand as the economy reopens.

Without doubt, Dollar General’s efficient pricing strategy, private label offerings and effective inventory management bode well. In order to boost traffic, the company has been focusing on both consumables and non-consumables categories. The company has been offering “better-for-you” products at affordable prices. It has been expanding cooler facilities to enhance the sale of perishable items as well. Initiatives such as DG Pickup and DG GO! mobile checkout aimed at providing convenient and contactless shopping experience are also noteworthy.

However, margins still remain an area to watch. Any deleverage in distribution and transportation costs, higher payroll expenses, and rise in expenses associated to maintain safety at work cannot be ruled out.

Dollar General Corporation Price, Consensus and EPS Surprise

Dollar General Corporation Price, Consensus and EPS Surprise
Dollar General Corporation Price, Consensus and EPS Surprise

Dollar General Corporation price-consensus-eps-surprise-chart | Dollar General Corporation Quote

What the Zacks Model Unveils

Our proven model does not conclusively predict a beat for Dollar General this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Dollar General has a Zacks Rank #2 but an Earnings ESP of -3.20%.

3 Stocks With a Favorable Combination

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.

Burlington Stores BURL has an Earnings ESP of +15.26% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ulta Beauty ULTA has an Earnings ESP of +17.59% and a Zacks Rank #2.

Costco COST has an Earnings ESP of +0.44% and a Zacks Rank #3.


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Dollar General Corporation (DG) : Free Stock Analysis Report

Costco Wholesale Corporation (COST) : Free Stock Analysis Report

Ulta Beauty Inc. (ULTA) : Free Stock Analysis Report

Burlington Stores, Inc. (BURL) : Free Stock Analysis Report

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