Dollar General Corporation (DG): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Dollar General, which looks unwilling to relinquish its Family Dollar's bid, posted third-quarter fiscal 2014 results, wherein both the top and bottom lines witnessed year-over-year increase of 7.8% and 9.7%, respectively, on the back of growth across Consumables, Home products and Apparel categories. However, both the net sales and earnings per share fell short of the Zacks Consensus Estimate hurt by a competitive retail landscape and lower margins. We believe Dollar General's initiatives as regards to management of expense, inventory, merchandise and operations are likely to push sales north. However, margins are likely to remain under pressure due to an increase in the sales of lower margin carrying consumables items and soft sales of discretionary products. Currently, we stay Neutral on the stock.


Overview:

Founded in 1939 and headquartered in Goodlettsville, Tennessee, Dollar General Corporation is one of the largest discount retailers in the United States. The company trades in low priced merchandise typically $10 or less. Apart from offering quality private brands, the company also provides products from other reputed manufacturers such as Clorox, Energizer, Procter & Gamble, Hanes, Coca-Cola, Mars, Unilever, Nestle, Kimberly-Clark, Kellogg's, General Mills, and PepsiCo. As of October 31, 2014, Dollar General had 11,715 stores in 40 states. It offers general merchandise in four categories namely Consumables, Seasonal, Home products and Apparel.

The Consumables Category is the leading category (75% of net sales for fiscal 2013) consisting of cleaning products, health & beauty products, snacks, perishables, packaged food and pet supplies and food.

The Seasonal Products Category (13% of net sales for fiscal 2013) consists of prepaid phones and accessories, small electronics, batteries, toys, greeting cards, hardware, decorations, automotive gardening supplies, stationery and home office supplies.

The Home products Category (6% of net sales for fiscal 2013) includes kitchen supplies, candles small appliances, light bulbs, cookware, frames, craft supplies, bed & bath soft goods and storage containers.

The Apparel Category (6% of net sales for fiscal 2013) consists of casual daily wear for infants, children, girls, boys, women and men, along with socks, intimate wear, disposable diapers, accessories and shoes.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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