Dollar General Shares Tank 5% On Weak Earnings & Outlook

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December 1, 2016 7:21am NYSE:DG

Discount retailer Dollar General Corp. (NYSE:DG) early Thursday posted weaker than expected third quarter results and offered a tepid outlook, sending its shares lower in morning trading.

The Goodlettsville, TN-based company reported Q3 adjusted EPS of $0.89, which missed analysts’ $0.93 estimate by four cents. Revenues rose 5% from last year to $5.32 billion, but also fell short of Wall Street’s $5.365 billion view.

Same-store sales fellĀ -0.1% in the latest period, versus estimates for a +0.5% gain. Dollar General noted that decline in comps was due to lower store traffic, which was partially offset by a higher average ticket size. Same-store sales are considered a key indicator of a retailer’s health, since they measure the year-over-year performance of stores open at least 12 months.

Gross profitĀ fell 49 basis points to 29.8% in the third quarter percent, hurt by higher discounts and promotions.

Looking ahead, Dollar General said it now expects 2016 EPS growth to come in at the low end of its prior guidance of 10% to 15%. On average, Wall Street analysts are looking for 13% growth for the year.

The company commented via press release:

“The challenging retail environment that we experienced in the 2016 second quarter continued into the third quarter, contributing to weakness in our same-store sales and our financial performance. In the 2016 third quarter, we invested in gross margin with the goal of driving traffic and sales over time. Many of these actions are gaining traction with our core customers, and we are encouraged by the early results. As expected, the full benefit on our same-store sales will not be immediate. In addition, we saw an acceleration in headwinds from average unit retail price deflation and reductions in SNAP benefits in the 2016 third quarter as compared to the 2016 second quarter. We are focused on efforts to drive traffic in our stores and to control the factors we can control as we look to overcome the issues impacting our results, many of which we believe are macroeconomic and transitory in nature.”

Dollar General shares fell $3.82 (-4.94%) to $73.50 in premarket trading Thursday. Prior to today’s report, DG had gained 7.58% year-to-date, which was roughly in-line with the performance of the benchmark S&P 500 during the same period.


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