DG tumbles in premarket trading

Dollar General (DG) stock was down 7% as of 9:27 AM EST in premarket trading on March 14 after the company announced its fiscal 2018 fourth-quarter earnings results, which missed analysts’ estimates. The company also issued a weak outlook for fiscal 2019.

Dollar General’s sales increased 8.5% to $6.65 billion in the fourth quarter of fiscal 2018, which ended on February 1, 2019. The company’s sales beat Wall Street’s expectation of $6.61 billion. Its adjusted EPS rose 24.3% to $1.84, but they lagged analysts’ consensus estimate of $1.88.

Dollar General Down as Q4 Earnings and 2019 Outlook Lag Estimates

Dollar General’s fourth-quarter sales were driven by contributions from new stores and SSSG (same-store sales growth) of 4.0% partially offset by the impact of store closures. The company’s SSSG was driven by the earlier-than-anticipated release of government SNAP assistance, which drove higher transaction sizes and improved customer traffic. The fourth quarter saw strength in the consumables, seasonal, and home categories, while the apparel category failed to impress.

Dollar General’s fiscal 2018 sales grew 9.2% to $25.6 billion, and its same-store sales grew 3.2%. The company’s adjusted EPS rose 33.0% to $5.97. Rival Dollar Tree (DLTR) underperformed Dollar General and reported sales growth of 2.6% to $22.8 billion in fiscal 2018. Dollar Tree’s adjusted EPS rose 12.1% to $5.45 in fiscal 2018.

Outlook for fiscal 2019

Dollar General expects sales growth of ~7% in fiscal 2019 compared to analysts’ expectation of 7.3%. Dollar General anticipates SSSG of 2.5% in fiscal 2019, lower than the 3.2% SSSG it saw in fiscal 2018.

Dollar General expects its fiscal 2019 EPS to be in the range of $6.30–$6.50. Analysts expect it to see adjusted EPS of $6.65 in the year.

The company has announced two new transformational plans, DG Fresh and Fast Track, to improve its performance. DG Fresh, which has already been rolled out in 300 stores, will focus on boosting the sales of fresh and frozen products. The company’s Fast Track initiative aims to improve in-store labor productivity.

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