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Alberto Abaterusso
Alberto Abaterusso
Articles (2075) 

Dollar General Falls Sharply on 4th-Quarter Results

Discount stores chain misses consensus on earnings

March 14, 2019 | About:

Shares of Dollar General Corp. (NYSE:DG) tumbled 7.18% to $112.02 in premarket trading on Thursday after missing earnings expectations for the fourth quarter of 2018 by 5 cents. The company posted earnings of $1.84 cents per share.

Revenue of $6.65 billion was up 8.5% year-over-year and missed expectations by $40 million.

Goodlettsville, Tennessee-based discount stores chain company also released results for the full year.

Dollar General recorded a 9.2% increase in total sales to $25.6 billion, a 3.2% increase in same-store sales, flat customer traffic and a 0.3 percentage-point decline in the gross margin to 30.5% of total sales. The gross profit margin declineddue to higher markdowns and sales of consumables and increased transportation costs and LIFO provision. At 22%, the selling, general & administrative expense of total sales ratio was flat.

Dollar General also reported a 5.4% increase in the operating profit to $2.1 billion, a 1.8 percentage-point jump into the effective income tax rate of 21.1% and a 6.7% increase in the net income to $1.6 billion.

Net earnings went up 6% to $5.97 per diluted share. Driven by the lower federal tax rate, the adjusted net earnings skyrocketed 33% to $5.97 per diluted share.

Looking ahead to 2019, Dollar General expects earnings to be between $6.3 and $6.5 per share. It also predicts 7% growth in net sales, 2.5% growth in same-store sales and between 4-6% growth in operating profit. The effective tax rate range is expected to be between 22-22.5%, and average capital expenditures to be $800 million.

The stock was trading around $120.68 per share at close Wednesday for a market capitalization of $31.72 billion. The stock climbed 29% over the 52 weeks through March 13 and is now above the 200-, 100- and 50-day simple moving average lines. The closing price on Wednesday was 38.9% above the 52-week low of $86.87 and 0.5% below the 52-week high of $121.27.

Wall Street issued an overweight recommendation rating for Dollar General with an average target price of $121.15 per share.

In addition, the company hiked the quarterly dividend by 10.34% to 32 cents per ordinary share, for a forward dividend yield of 1.06% versus an industry median of 2.22%. Dollar General will pay the dividend around April 23 to its shareholders of record April 9. Dollar General has paid dividends since 2015.

In 2018, Dollar General repurchased $1 billion shares of its common stock at an average price of $101.86 per share. Under its program, the company plans to repurchase another $1 billion of its shares in 2019.

Disclosure: I have no positions in any securities mentioned.

About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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