Dollar General or Dollar Tree: Who Fared Better in Q1?

Stocks up in reaction to results

Dollar General (DG) exceeded analysts’ sales and earnings expectations for the first quarter of fiscal 2019, which ended on May 3. Dollar General stock rose 7.2% on May 30, the day it announced first-quarter results. Rival Dollar Tree (DLTR) exceeded analysts’ sales expectations and was in line with the earnings forecast for the first quarter of fiscal 2019, which ended on May 4. Dollar Tree stock rose 3.1% on May 30, as investors were pleased with the improvement in Dollar Tree’s Family Dollar business.

As of May 31, Dollar General stock was up 17.8% on a YTD basis and was ahead of Dollar Tree stock, which rose 12.5%. Both the companies have outperformed the 9.8% rise in the S&P 500 Index on a YTD basis.

Dollar General or Dollar Tree: Who Fared Better in Q1?

First-quarter earnings

Dollar General’s adjusted EPS grew 8.8% to $1.48 in the first quarter driven by higher sales and a 3.3% reduction in average share count, reflecting the effect of share repurchases. The company surpassed analysts’ EPS forecast of $1.39. Dollar General kept its fiscal 2019 outlook unchanged and continues to expect EPS in the range of $6.30 to $6.50.

Dollar Tree’s adjusted EPS declined 4.2% to $1.14 due to higher investments associated with growth initiatives. Dollar Tree now expects its fiscal 2019 EPS between $4.77–$5.07 compared to the previous outlook range of $4.85–$5.25. The new outlook reflects the impact of $15 million and $30 million of import freight costs and store closure costs, respectively.

The guidance of both Dollar General and Dollar Tree takes into account the increase in tariffs to 25% from 10% on Chinese imports that became effective May 10. However, neither of the companies incorporated into their forecast the potential tariffs on List 4 goods. Both Dollar General and Dollar Tree, like several other retailers, have cautioned that any further tariffs would result in higher prices for customers.