Spring Weather Freezes Dollar General's Sales, Sending Shares Lower

Discount retailer misses earnings, revenue expectations

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May 31, 2018
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Impacted by an unusually cold, damp spring, discount retail chain Dollar General Corp. (DG, Financial) posted disappointing first-quarter results before the opening bell on Thursday, sending shares lower.

The Goodlettsville, Tennessee-based company disclosed adjusted earnings per share of $1.36, falling short of Thomson Reuters’ estimates of $1.40.

Revenue grew 9% from the prior-year quarter to $6.1 billion, but also missed estimates. Further, while same-store sales rose 2.1% during the quarter, it was below the 3.24% increase analysts were expecting.

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Dollar General noted that while the weather softened the demand for apparel, seasonal items and home products, it still saw steady sales of food items.

Following the announcement, shares sank 6.4% in premarket trading. Fellow discount retailer Dollar Tree Inc. (DLTR, Financial) also reported lower sales as a result of the weather, sending shares sliding more than 12% on Thursday.

Despite the weather-related headwinds, CEO Todd Vasos said he is proud of the company’s performance in the first quarter.

“We are pleased with the start of the second quarter, and based on our year-to-date performance and outlook for the remainder of 2018, we are reiterating our full-year guidance,” he said.

For the full year, Dollar General expects revenue to increase approximately 9%, while same-store sales growth is projected to be in the mid-2% range. Earnings per share are forecasted to range from $5.95 to $6.15.

The company also anticipates $300 million in cash benefits as a result of the Tax Cuts and Jobs Act.

With a market cap of $23.97 billion, Dollar General was trading around $89.68 on Thursday morning, down 7.07%. GuruFocus estimates the stock has lost approximately 6% year to date.

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Disclosure: No positions.