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Dollar General’s Better-than-Expected Sales Comps

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Dec. 12 2017, Updated 2:50 p.m. ET

Dollar General beats Q3 top line

As we discussed in Part 1 of this series, Dollar General (DG) reported its results for the third quarter of 2017 (or 3Q17) on December 7. The discount retailer’s top line rose 11% YoY (year-over-year) to $5.9 billion. In comparison, Wall Street was expecting a 9% jump in sales to $5.8 billion. The company hasn’t missed top-line expectations over the last four consecutive quarters.

Same-store sales rose 4.3% during the quarter versus analyst expectations of a 2.7% rise. The company recorded negative comps of -0.1% in the same quarter last year.

The current quarter’s strength in comps was driven by an increase in average transaction size and higher traffic, marking Dollar General’s best performance since 4Q14.

Comps were positive about both consumables and non-consumables, although growth was stronger at the former.

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“We are pleased with our overall third quarter results, which include a strong same-store sales growth of 4.3% and increases in both average transaction amount and customer traffic over the 2016 third quarter. During the quarter, we effectively balanced our same-store sales growth while achieving gross profit rate expansion and continuing our planned investments in the business,” commented Todd Vasos, Dollar General’s chief executive officer.

How did Dollar General’s competitors fare in recently?

Dollar Tree (DLTR) reported third-quarter results on November 21. The company reported a 6.3% rise in total sales to $5.32 billion, beating the consensus by $40 million. Its sales comps increased 3.2% (versus analyst expectations of 2.4% rise) during the quarter.

Big-box retailer Walmart (WMT), which reported results on November 16, also outdid Wall Street expectations. The company’s total sales increased 4.2% to $123.2 billion, $2.2 billion more than expectations. The retailing giant’s US comps increased 2.7% during the quarter.

Investors looking for exposure to Dollar General can consider the Van Eck Retail RTF (RTH), which invests 3.3% of its total holdings in the company.

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