Dollar General Corp.(NYSE: DG) stock surged over 1.9% on March 16th, 2017 (Source: Google finance driven by the group’s positive results. DG stock has fallen 14.35% in the last one year (source: Google Finance). In the fourth quarter, the group has reported the adjusted earnings per share of $1.49, beating the analysts’ estimates for the adjusted earnings per share of $1.41. The company had reported the adjusted revenue growth of 13.7 percent to $6.01 billion in the fourth quarter, beating the analysts’ estimates for revenue of $5.97 billion.
The same-store sales has increased 1.0 percent majorly due to an increase in average transaction amount, partially offset by a slight decline in traffic that moderated from the second and third quarters. Further, the same-store sales grew due the positive results in the consumables and home products categories, partially offset by negative results in the seasonal and apparel categories. The net sales increase was positively affected by sales from new stores, modestly offset by sales from closed stores.
Dollar General and the competitor Dollar Tree Inc are facing stiff competition from Wal-Mart and Target Corp, which have been discounting aggressively, even amid falling grocery prices, to boost store traffic.
Dollar General has planned to open approximately 1,000 new stores in 2017. DG is making significant investments, primarily in compensation and training for the store managers. These investments are expected to put pressure on the 2017 earnings, however, this will strengthen the market share position over time.
DG had earmarked about $70 million in 2017, mainly for the pay hikes. Other retailers have also hiked manager salaries in the past year in response to a tight labor market, and also to comply with a rule change that extended mandatory overtime pay to more workers.
In addition, DG has a goal is to grow the earnings per share at a 10 percent or higher rate on an adjusted basis over the longer term.
Additionally, for 2017, Dollar General expects the net sales to increase four to six percent with same-store sales growth to be slightly positive to up two percent. The earnings per share is expected to be in the range of $4.25 to $4.50, while the analysts were expecting the company to report earnings per share of $4.68.
Dollar General has approved an increase of four percent in its quarterly cash dividend to shareholders. The first quarter dividend of $0.26 per share will be payable on April 25th, 2017 to shareholders of record of the company’s common stock on April 11th, 2017.