Dollar General’s third-quarter earnings beat expectations.
Justin Sullivan/Getty ImagesDollar General reported better-than-expected fiscal third-quarter earnings, but that didn’t prop up the stock, as investors debate how it will perform post-pandemic.
Dollar General (ticker: DG) said it earned $2.31 a share on revenue that climbed 17.3% to $8.2 billion. Analysts were looking for per-share earnings of $2.02 on revenue of $8.14 billion. Same-store sales were up 12.2%, while consensus called for an 11.4% rise.
It was a good quarter overall for Dollar General, which saw gross profit expand to 31.3% from 29.5%—helped by lower promotions—while selling, general, and administrative costs fell to 21.9% from 22.5%, as higher revenues offset increased costs related to Covid-19.
However, investors have been strongly focused on clues about how pandemic winners, like Dollar General, are holding on to their gains. In that regard, company’s decision to not provide guidance—citing the pandemic—along with a decline in comparable sales from the second quarter on lower traffic may be weighing on the stock today, even as both were expected. Dollar Tree’s (DLTR) robust third-quarter results, delivered last week, also raised the bar.
Yet there were a lot of positives as well. Management said that comparable sales have reaccelerated to 14% quarter to date, showing that the discount retailer’s pandemic-boost isn’t over yet. The third quarter also saw shoppers purchase more discretionary items, helping margins, while the company spent more than $900 million on share repurchases. In addition, Dollar General said it plans to open more than 1,000 stores next year.
With a nearly 40% year to date gain, investors’ expectations were undoubtedly high going into the report, and in many ways Dollar General delivered. The shares are down 1.8% to $213.62 in recent trading, although Dollar General’s value bent and defensive nature may help it perform well as economic uncertainty persists through the holiday shopping season.
Write to Teresa Rivas at teresa.rivas@barrons.com
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December 03, 2020 at 10:25PM
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