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Dollar General's Better Pricing & Decent Comps to Fuel Sales
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Better pricing, private label offerings, effective inventory management, and merchandise initiatives have helped Dollar General Corporation (DG - Free Report) in carving out a niche in the retail space. The company’s everyday low-price model is anticipated to drive traffic persistently despite the rising popularity of online retailers. We believe that store expansion initiatives, continued restructuring and the improvement of distribution centers will keep boosting revenues.
The Zacks Consensus Estimate for its current financial year revenues and earnings suggests an improvement of 15% and 31.4%, respectively, from the year-ago reported figures.
Notably shares of this discount retailer have rallied 19.9% so far in the year against the industry’s decline of 3%. This Zacks Rank #1 (Strong Buy) stock has also comfortably outperformed the S&P 500 Index, which fell 2.7% in the same period. The stock also received a boost from the company’s better-than-expected first-quarter fiscal 2020 results, wherein both the top and the bottom line improved year over year. This was the fifth straight quarter of positive earnings and sales surprises.
Let’s Introspect
The company’s impressive same-store sales growth story continued in fiscal 2020. The metric increased 21.7% year over year owing to rise in average transaction amount and customer traffic during the first quarter. Consumables, Seasonal, Apparel and Home categories favorably impacted the metric. Management stated that change in consumer behavior due to the coronavirus pandemic had a favorable impact on the performance.
Same-store sales improved 5.5%, 34.5% and 21.5% in the months of February, March and April, respectively. Dollar General also informed that since the end of the first quarter, it has continued to witness “elevated demand” across its stores. Since the end of first quarter and through May 26, same-store sales have risen roughly 22% compared with prior-year period.
In order to increase traffic, Dollar General has been focusing on both consumables and non-consumables categories. The company has also been offering better-for-you products at affordable prices. Additionally, it has been expanding cooler facilities to enhance the sale of perishable items and rolling out DG digital coupon program and DG Go app. The company has DG GO! mobile checkout in approximately 750 stores.
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. By the end of fiscal 2020, the company plans to operate up to ten DG Fresh distribution facilities, which will serve roughly 12,000 stores.
As part of its non-consumable initiative, the company is now focusing on categories of home, domestics, housewares, party and occasion. The non-consumable initiative offering was available across more than 3,200 stores at the end of the first quarter. The company plans to expand the offering to about 5,000 stores by the end of fiscal 2020.
Wrapping Up
It’s abundantly clear that in spite of a tough retail landscape, the company has been thriving, when several traditional operators are finding it difficult to cope. Although management withdrew fiscal 2020 guidance issued on Mar 12 on account of the pandemic, it still expects the company to surpass the same. The company had earlier projected an increase of 10% in earnings per share on a year-over-year basis. It had guided net sales growth of 7.5-8% and same-store sales increase of 2.5-3% for the fiscal year.
Sprouts Farmers Market (SFM - Free Report) has a long-term earnings growth rate of 9.2%. Currently, it sports a Zacks Rank #1.
SpartanNash Company (SPTN - Free Report) has a trailing four-quarter positive earnings surprise of 17.1%, on average. It carries a Zacks Rank #1.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.
Image: Bigstock
Dollar General's Better Pricing & Decent Comps to Fuel Sales
Better pricing, private label offerings, effective inventory management, and merchandise initiatives have helped Dollar General Corporation (DG - Free Report) in carving out a niche in the retail space. The company’s everyday low-price model is anticipated to drive traffic persistently despite the rising popularity of online retailers. We believe that store expansion initiatives, continued restructuring and the improvement of distribution centers will keep boosting revenues.
The Zacks Consensus Estimate for its current financial year revenues and earnings suggests an improvement of 15% and 31.4%, respectively, from the year-ago reported figures.
Notably shares of this discount retailer have rallied 19.9% so far in the year against the industry’s decline of 3%. This Zacks Rank #1 (Strong Buy) stock has also comfortably outperformed the S&P 500 Index, which fell 2.7% in the same period. The stock also received a boost from the company’s better-than-expected first-quarter fiscal 2020 results, wherein both the top and the bottom line improved year over year. This was the fifth straight quarter of positive earnings and sales surprises.
Let’s Introspect
The company’s impressive same-store sales growth story continued in fiscal 2020. The metric increased 21.7% year over year owing to rise in average transaction amount and customer traffic during the first quarter. Consumables, Seasonal, Apparel and Home categories favorably impacted the metric. Management stated that change in consumer behavior due to the coronavirus pandemic had a favorable impact on the performance.
Same-store sales improved 5.5%, 34.5% and 21.5% in the months of February, March and April, respectively. Dollar General also informed that since the end of the first quarter, it has continued to witness “elevated demand” across its stores. Since the end of first quarter and through May 26, same-store sales have risen roughly 22% compared with prior-year period.
In order to increase traffic, Dollar General has been focusing on both consumables and non-consumables categories. The company has also been offering better-for-you products at affordable prices. Additionally, it has been expanding cooler facilities to enhance the sale of perishable items and rolling out DG digital coupon program and DG Go app. The company has DG GO! mobile checkout in approximately 750 stores.
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. By the end of fiscal 2020, the company plans to operate up to ten DG Fresh distribution facilities, which will serve roughly 12,000 stores.
As part of its non-consumable initiative, the company is now focusing on categories of home, domestics, housewares, party and occasion. The non-consumable initiative offering was available across more than 3,200 stores at the end of the first quarter. The company plans to expand the offering to about 5,000 stores by the end of fiscal 2020.
Wrapping Up
It’s abundantly clear that in spite of a tough retail landscape, the company has been thriving, when several traditional operators are finding it difficult to cope. Although management withdrew fiscal 2020 guidance issued on Mar 12 on account of the pandemic, it still expects the company to surpass the same. The company had earlier projected an increase of 10% in earnings per share on a year-over-year basis. It had guided net sales growth of 7.5-8% and same-store sales increase of 2.5-3% for the fiscal year.
3 More Stocks Looking Hot
Big Lots (BIG - Free Report) , a Zacks Rank #1 stock, has a trailing four-quarter positive earnings surprise of 62.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sprouts Farmers Market (SFM - Free Report) has a long-term earnings growth rate of 9.2%. Currently, it sports a Zacks Rank #1.
SpartanNash Company (SPTN - Free Report) has a trailing four-quarter positive earnings surprise of 17.1%, on average. It carries a Zacks Rank #1.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.
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