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Dollar General Earnings 'Decent' As Q4 Sales Miss

Dollar General (DG) sales and guidance fell below Wall Street forecasts, but shares ultimately rallied Monday on the "decent result" amid a difficult economy.

Goodlettsville, Tenn.-based Dollar General, the largest discount variety chain and operator of more than 10,000 stores, said Q4 earnings per share climbed 11.5% to 97 cents, beating analyst consensus by 7 cents a share. Gross profit margins improved, surprising some analysts.

Revenue rose less than 1% to $4.21 billion, lighter than the expected $4.26 billion. Sales rose 8%, excluding an extra week in Q4 2011. Either way, it was the weakest gain in several years.

Adjusted same-store sales rose 3% vs. a year earlier.

"We grew our market share and invested strategically," Chairman and CEO Rick Dreiling said in a statement. He cited the payroll tax hike and delayed tax refunds as hurting sales.

Bad economic times are a mixed blessing for Dollar General.

"When times get tough our customers need us even more," Dreiling said on the conference call.

Looking ahead, Dreiling expects Dollar General's sales to grow 10% to 12% this year, with same-store sales up 4% to 6%. But he sees EPS of $3.15 to $3.30. The midpoint is below the $3.27 consensus of analysts polled by Thomson Reuters.

Investors struggled with Dollar General's results. Shares gapped up 5% early to a six-month high, briefly turned negative before closing for a 2% gain on the stock market Monday.

Dollar General is pushing into tobacco products. That may have hurt Family Dollar Stores (FDO), which fell nearly 2% Monday.

Dollar Tree (DLTR) shot up early, but closed up just a fraction.

Shares of all three dollar stores sold off sharply in mid-2012. They started to rebound late last month on Dollar Tree's stronger-than-expected results.

Dollar General's Q4 results weren't perfect but good enough, according to brokers Sanford Bernstein and Nomura Securities.

"We believe this was a decent result in the midst of a choppy period," Nomura analyst Aram Rubinson said in a client note.

Sales of consumables rose 1.8%, as Dollar General and close rivals add coolers for refrigerated and frozen foods. But apparel, seasonal and home goods sales all fell.

Dollar General expects to open about 635 stores this year and remodel or relocate 550, boosting total square footage by 7%.

Five Below (FIVE), which caters to teens and pre-teens with items priced $5 and below, reports Wednesday after the market close. Wall Street expects a profit of 38 cents a share on sales edging past $170 million.

Five Below, which came public at 17 last July, briefly hit a record 43.04 early Monday. It traded as low as 40.60 before closing down 2 cents at 41.55.