Dollar General (NYSE:DG) Upgraded by Cleveland Research to Buy

Dollar General (NYSE:DG) stock rose 0.020% (As on July 6, 11:37:12 AM UTC-4, Source: Google Finance) after the company upgraded by Cleveland Research to Buy from a “neutral” rating. Cleveland Research told clients on Tuesday that “market share gains appear to be accelerating” as increased pressure on consumers drives traffic to discount stores. The research firm highlighted convenient store locations and easing supply chain pressures as key to providing upside to upcoming earnings reports. The analysis added that gross margins remain resilient despite supply chain and inflationary issues, with markdowns manageable across the product portfolio. With sales also expected to pick up, the firm raised its EPS estimates to well above the consensus in the coming quarters, anticipating significant upside for shares and raising his rating on the stock to “Buy” from “Neutral”.

The channel seems more bullish on the outlook for DG through the balance of the year and looking out to 2023 based on improving market share performance in the near term and the view that DG is well-positioned to benefit in an environment where there is likely more pressure on consumer spending going forward, as per the reseaech note. “The company has historically seen accelerated share gains in tougher economic and consumer environments, and the channel expects more of the same over the medium/long term.”

On the other hand, the company reported net income of $552.7 million for the first quarter of 2022, a decrease of 18.5% compared to $677.7 million in the first quarter of 2021. Net sales increased 4.2% to $8.8 billion in the first quarter of 2022 compared to $8.4 billion in the first quarter of 2021. The net sales increase was primarily driven by positive sales contributions from new stores, partially offset by the slight decline in same-store sales and the impact of store closures. Same-store sales decreased 0.1% compared to the first quarter of 2021, driven by a decline in customer traffic, partially offset by an increase in average transaction amount. Same-store sales in the first quarter of 2022 declined in each of the seasonal, apparel, and home products categories, offset by an increase in the consumables category. During the first quarter, the company executed more than 800 real estate projects, and made significant progress advancing the key strategic initiatives to enhance the value and convenience proposition for the customers. During first quarter of 2022, the Company opened 239 new stores, remodeled 532 stores, and relocated 32 stores.

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