Will Dollar General’s Q1 Sales Surpass Expectations?

Performance in fiscal 2018

Dollar General (DG) lagged analysts’ sales estimate in the first quarter of fiscal 2018 but surpassed expectations in the remaining three quarters. In the fourth quarter of fiscal 2018, which ended on February 1, Dollar General’s sales grew 8.5% to $6.65 billion and exceeded analysts’ expectation of $6.61 billion. The company’s top line growth was driven by SSSG (same-store sales growth) of 4.0% and sales contributions from new stores partially offset by the impact of store closures.

The company’s SSSG gained from the early release of government assistance via the Supplemental Nutrition Assistance Program and was driven by favorable results in the consumables, seasonal, and home businesses. However, the apparel category failed to impress in the fourth quarter.

Will Dollar General’s Q1 Sales Surpass Expectations?

For fiscal 2019, Dollar General’s net sales grew 9.2% to $25.6 billion driven by SSSG of 3.2% and contributions from new stores.

Growth expectations

Analysts expect Dollar General’s sales to rise 7.4% to $6.57 billion in the first quarter of fiscal 2019, which ended on May 3. Currently, analysts expect Dollar General’s sales to increase 7.2% to $27.5 billion in fiscal 2019, which ends on January 31, 2020.

For fiscal 2019, Dollar General’s guidance issued in March 2019 indicates net sales growth of ~7% and SSSG of ~2.5%.

In an attempt to enhance its nonconsumable sales, Dollar General expanded its assortment in the home, domestics, housewares, occasion, and party categories in 700 stores in fiscal 2018. The company plans to expand its nonconsumable assortment to ~2,400 stores by the end of fiscal 2019.

The company’s sales growth initiatives also include its Better For You program, under which it’s launched healthier food options in over 2,500 stores. Dollar General plans to offer these healthier products in ~6,000 stores by the end of fiscal 2019. To attract more customers, Dollar General continues to remodel its stores and add more coolers.

These new stores are expected to generate additional sales. Dollar General plans to open 975 stores in fiscal 2019. The company opened 900 new stores and closed 64 stores in fiscal 2018.