Dollar General Reports Better-than-Expected Sales Comps in 4Q17

As we discussed in Part 1 of this series, Dollar General (DG) reported its fourth-quarter 2017 results on March 15. The discount retailer’s top line increased 2% YoY (year-over-year) to $6.13 billion. In comparison, Wall Street was expecting a 3.3% jump in the company’s sales to $6.2 billion.

Sales growth during the quarter was negatively impacted by approximately seven percentage points from the additional 53rd week in 2016.

In comparison, competitor Dollar Tree (DLTR)—which reported its fourth-quarter results on March 7— posted a 12.9% YoY increase in total sales to $6.36 billion. More than 50% of this increase was driven by the additional 53rd week in 2017. The company, however, failed to meet Wall Street expectations by $30 million.

Dollar General’s same-store sales grew 3.3% during the quarter, versus analysts’ expectations of a 2.5% rise. In comparison, comps were up 1% during the same quarter last year.

Comps growth during the quarter was driven primarily by an increase in average transaction size, as the company recorded a decline in consumer traffic. Consumables and Seasonal were the key comp-driving categories. Their results were partially offset by weak performances for the Apparel and Home categories.

“I am pleased with our overall fourth quarter performance, as we delivered strong same-store sales growth of 3.3%, while achieving a healthy rate of gross margin expansion,” commented Todd Vasos, Dollar General’s CEO.

In comparison, Dollar Tree’s same-store sales increased 2.4% in Q4, missing analysts’ expectations of a 2.7% jump. The discount retailer’s Dollar Tree banner, which strictly sells products under $1 in value, recorded its 40th consecutive quarter of comps growth.

Investors looking for exposure to Dollar General can consider the Van Eck Retail RTF (RTH), which invests 2.6% of its total holdings in the company.