Dollar General Posts Upbeat Q1 Results, Raises Full-Year Guidance

Dollar General Corporation (DG) reported stronger-than-expected Q1 results, topping both earnings and revenue estimates driven by robust performance across all segments. Shares of the discount retailer gained 2.2% on Thursday.

The company reported adjusted earnings of $2.82 per share, beating analysts’ expectations of $2.19 per share. Net sales of $8.4 billion exceeded the consensus estimate of $8.28 billion.

Meanwhile, earnings per share jumped 10.2% while net sales declined 0.6% on a year-over-year basis.

Same-store sales declined 4.6% in the quarter, attributable to a decrease in customer traffic, partially offset by average transaction amount growth. However, same-store sales grew 17.1% on a 2-year stack basis.

The company bought back shares worth $1 billion at an average price of $201.74. The remaining authorization for repurchases is $1.7 billion. (See DG stock analysis on TipRanks)

Based on robust Q1 results, management raised the financial guidance for FY2021.  Sales are now expected to range between a 1% decline and 1% increase versus the prior guidance range of 2% decline to flat sales.

Same-store sales are forecast to decline by 3% – 5% versus prior guidance of a decline between 4% – 6%. EPS is expected to grow at a 2- year compound annual growth rate (CAGR) of 20% – 24% to between $9.50 and $10.20. EPS was previously expected to range between $8.80 and $9.50.

Dollar General will continue its plans to execute 2,900 real estate projects in FY2021, which includes opening 1,050 new stores, 1,750 store remodels, and 100 store relocations.

Following the Q1 results, Piper Sandler analyst Peter Keith maintained a Buy rating and increased the price target from $215 to $230 (12.5% upside potential) on the stock.

Keith forecasts the stock price to reach higher levels as the market “soon looks to 2022”.

Overall, the stock has a Strong Buy consensus rating based on 14 Buys, 2 Holds, and 1 Sell. The average analyst price target of $231.40 implies 13.2% upside potential from current levels. Shares of DG have jumped 11% over the past year.

Dollar General scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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