What Hurt Dollar General’s Fiscal 2016 Top Line
Dollar General fell short of consensus top line estimates in 2016
Dollar General’s (DG) total sales grew 7.9% YoY (year-over-year) in fiscal 2016 to $22 billion. Sales growth was driven by a 0.9% increase in comps and the impact of 900 new stores that the company opened during the year.
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As we discussed in the previous part of this series, comps growth slowed during the year as the company faced the impact of persistent food deflation and reduced SNAP benefits.
SNAP (Supplemental Nutritional Assistance Program) benefits are the assistance provided by the government to low-income families for buying food. The government’s recent cut to these benefits impacted the spending of Dollar General’s customers, negatively affecting the company’s sales.
As a result, Dollar General’s missed the consensus sales target in three out of the four quarters of 2016. While the demand for the company’s home products and consumables remained robust, apparel and seasonal categories delivered subdued performance.
How did Dollar General’s competitors perform?
While Dollar General’s fiscal 2016 growth of 7.9% was lower than the 9.4% average growth achieved between fiscal 2011 and fiscal 2015, the company still managed to outperform key competitors in the supermarket and mass-merchandising space and do as well as its major competitor in the discount store space, Dollar Tree (DLTR).
Dollar Tree’s sales rose 33% YoY in fiscal 2016 to $20.7 billion. However, around 85% of this increase came from the incremental sales added by the integration of Family Dollar stores.
Retail heavyweights Walmart (WMT) and Costco (COST) saw sales growth of 0.8% and 2.1%, respectively, for the full fiscal year while supermarket giant Kroger (KR) reported full-year sales growth of 5%.
Investors looking for exposure to Dollar General, Dollar Tree, Walmart, Kroger, and Costco can consider investing in the SPDR S&P Retail ETF (XRT), which invests 5.6% of its total holdings in the companies.
Read the next part of this series to learn about the company’s recent margins and profitability.