Dollar General Corp. (NYSE: DG)
Earnings Report
Yesterday before the market opened, Dollar General (DG) reported earnings that barely beast analyst estimates but still sent shares north in the premarket session. DG reported 88 cents per share on sales just over $5 billion with same store sales up just over 2% while analyst were predicting 87 cents per share. DG also raised guidance for fiscal year 2015 and Q4 with earnings per share of $3.95 up from $3.85 and $1.28 from $1.23 respectively. A large part of this successful quarter was mainly due to DG’s ability to control costs through new management initiatives that is beginning to flow through to the bottom line. During the earnings conference call, CEO and Director Todd Vasos stated,
“Once again, we delivered strong financial performance for the quarter. I believe we have further opportunity to take significant steps to better execute our initiatives to serve our consumers and build on our strong foundation for future growth . . . For the 30th consecutive quarter-over-quarter, we increased both our customer traffic and average ticket. Gross margin expanded by 36 basis points to 31.2% which follows our strong first quarter margin performance.” SeekingAlpha
This was a decent earnings release for DG and since we are coming into the holiday season we could see another strong earnings releases for next quarter. Retail is a highly competitive industry and DG will have to be diligent in maintaining the results of their cost controlling measures to stay relevant. Keep an eye on their bottom line come next quarter’s results to see how they did. Analysts have an average price target of $81.85 with most analysts holding a Buy recommendation.
DG Technicals
The day before their morning earnings release, DG closed at $65.35 with very little price movement. Today they opened $66.80 and never looked back. The earnings beat and upbeat outlook sent shares soaring as they closed at $68.12 on over 9.5 million shares traded, just over 4% from yesterdays close. This all happened while the market was getting absolutely smoked. The SPY finished down 29.89 points while the DOW closed down just over 252 points, a 1.4% decrease. That to me shows DG has a tremendous amount of relative strength and we could see a continuation of this move over the next few trading periods.
DG started the year off great with a nice run into the low $80s before getting hammered back down to yearly lows of $59.75, just over 11 points down from where they started the year. Shares have started to recover and this earnings release really gave them a boost, pushing shares back into the high $60s range. Looks like there will be some resistance at the $69 and $70 level while support will be met around $66.75 and $66. I would like to see some consolidation around this area where they closed at, $68.12, and then make a push for $70 with some volume. Another possibility is a reversal head and shoulders with the right shoulder coming back down into the $65 range before heading back up, so that is something else to keep an eye on. Based on this earnings release and the current analyst price target, DG shares seem to be on sale so if you like the brand then this could be a good time to pick them up cheap.
About Dollar General Corp.
Dollar General Corp. is a discount retailer in the United States. The company offers a selection of merchandise, including consumables, seasonal, home products and apparel. It offers a focused assortment of everyday necessities, which drive frequent customer visits, and key items in a broad range of general merchandise categories. The company’s consumables include paper and cleaning products, such as paper towels, bath tissue, paper dinnerware, trash and storage bags, laundry and other home cleaning supplies; packaged food, such as cereals, canned soups and vegetables, condiments, spices, sugar and flour; perishables, such as milk, eggs, bread, frozen meals, beer and wine; snacks, such as candy, cookies, crackers, salty snacks and carbonated beverages; health and beauty, including over-the-counter medicines and personal care products, such as soap, body wash, shampoo, dental hygiene and foot care products; and pet, including pet supplies and pet food. Its seasonal products include decorations, toys, batteries, small electronics, greeting cards, stationery, prepaid phones and accessories, gardening supplies, hardware, automotive and home office supplies. Its home products includes kitchen supplies, cookware, small appliances, light bulbs, storage containers, frames, candles, craft supplies and kitchen, bed and bath soft goods. The company’s apparel includes casual everyday apparel for infants, toddlers, girls, boys, women and men, as well as socks, underwear, disposable diapers, shoes and accessories. Dollar General was founded by J. L. Turner and Hurley Calister Turner Sr. in 1939 and is headquartered in Goodlettsville, TN. MarketWatch