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Dollar General Hits 52-Week High: What's Driving the Stock?

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Dollar General Corporation (DG - Free Report) hits a 52-week high of $165.47, before closing the session a tad lower at $164.35 on Oct 21. Shares of this Goodlettsville, TN-based company have rallied approximately 33% in the past six months, outperforming the industry’s growth of 22.2%. This Zacks Rank #2 (Buy) stock has also comfortably outperformed the Retail-Wholesale sector and the S&P 500 Index that advanced 1% and 2.1%, respectively, in the said time frame. With a long-term earnings growth rate of 9.6% and a VGM Score of B, Dollar General is positioned to attain new highs.

Factors Narrating Dollar General’s Growth Story

Dollar General’s commitment toward better price management, cost containment, private label offering, effective inventory management, merchandise and operational initiatives bodes well. Also, the company’s comparable-store sales (comps) growth story is impressive. Notably, fiscal 2018 was the 29th consecutive year of same-store sales growth for the company.

In second-quarter 2019, comps increased 4% year over year owing to rise in average transaction amount and customer traffic. Consumables, Seasonal and Home categories favorably impacted the metric, while Apparel category had a negative impact on the same. Management expects same-store sales to increase in the low-to-mid 3% range in fiscal 2019 compared with the prior estimate of approximately 2.5% growth.

In order to increase traffic, Dollar General is focusing on both consumables and non-consumables categories. The company is also offering better-for-you products at affordable prices. It is expanding cooler facilities to enhance the sale of perishable items and rolling out DG digital coupon program and DG Go app. Management introduced two transformational strategic initiatives — DG Fresh, designed to enable self-distribution of fresh and frozen products, and Fast Track, an in-store labor productivity and customer convenience initiative.

Apart from these, the company has been steadily increasing its store base. During fiscal 2019, it plans to open about 975 new stores, remodel 1,000 stores and relocate 100 stores. Of the planned remodels, the company expects to convert approximately 500 stores in the Dollar General traditional plus or DGTP format. During the first half, it opened 489 new stores, remodeled 653 stores (including 254 DGTP remodels), and remodeled and relocated 46 stores.

We believe that these efforts will continue driving the company’s performance helping it reach new highs.

Key Picks

Burlington Stores, Inc. (BURL - Free Report) has a long-term earnings growth rate of 15.9% and carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tuesday Morning Corporation (TUES - Free Report) delivered positive earnings surprise of 25.4% in the last four quarters. The stock currently sports a Zacks Rank #1.

Costco Wholesale Corporation (COST - Free Report) has a long-term earnings growth rate of 8.5% and a Zacks Rank #2.

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