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

Posted
12/11/2013 7:00:00 AM
By: Zacks.com
Referenced Stocks:DG

Summary:
Dollar General's first-quarter fiscal 2014 earnings missed the Zacks Consensus Estimate but rose 1.4% year-over-year buoyed by the Consumables category. Net sales climbed 6.8% but fell short of the Zacks' expectation as unfavorable weather conditions, stiff competition and cautious consumer spending impacted the top-line. Comparable-store sales also grew in the quarter driven by higher traffic and average transaction count. The comps have displayed an upward trajectory for the past 24 years defying unfavorable macroeconomic trends. Further, Dollar General's initiatives as regards to management of expense, inventory, merchandise and operations are likely to push sales north. However, we believe 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. As of May 2, 2014, Dollar General had 11,338 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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