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Will Dollar General's (DG) Strategies Help Lift Q1 Earnings?


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Dollar General Corporation DG is scheduled to report first-quarter fiscal 2018 results on May 31. In the last reported quarter, the company reported in-line earnings. However, we note that in the trailing four quarters, this discount retailer has outperformed the Zacks Consensus Estimate by an average of 2.3%.

The Zacks Consensus Estimate for the quarter under review is pegged at $1.40, up nearly 36% year over year. Analysts polled by Zacks anticipate revenues of $6,189 million, up roughly 10% from the year-ago quarter. Well the obvious question that comes to mind is whether Dollar General will be able to pull off positive earnings surprise.

Factors at Play

We believe that Dollar General's commitment toward better price management, cost containment, private label offering, effective inventory management, merchandise and operational initiatives should drive sales and margin trends. This is quite evident from the aforementioned Zacks Consensus Estimate.

Moreover, in order to increase traffic, Dollar General is focusing on both consumables and discretionary categories. Additionally, the company is expanding its cooler facilities to enhance the sale of perishable items and is rolling out DG digital coupon program too.

Dollar General's comparable-store sales (comps) growth story is impressive. Rise in average transaction has been driving comps higher. In first, second, third and fourth quarter of fiscal 2017, comps increased 0.7%, 2.6%, 4.3% and 3.3%, respectively. Given the past trends and strategic endeavors, the company is likely to continue with its positive comps performance in the to-be-reported quarter.

Analyst polled by Zacks expects sales in the Consumables and Home Products categories to be $4,692 million and $377 million, up 8.7% and 13.2% year over year, respectively. Apparel and Seasonal categories sales are projected to be $304 million and $774 million, up 2% and 16.8%, respectively.

Dollar General Corporation Price, Consensus and EPS Surprise

Dollar General Corporation Price, Consensus and EPS Surprise | Dollar General Corporation Quote

What the Zacks Model Unveils?

Our proven model shows that Dollar General is likely to beat estimates this quarter. This is because a stock needs to have both - a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP - for this to happen. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Dollar General has an Earnings ESP of +0.95% and a Zacks Rank #2. This makes us reasonably confident that it is likely to outperform estimates.

Other Stocks With Favorable Combination

Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

DSW Inc. DSW has an Earnings ESP of +3.47% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

PVH Corp. PVH has an Earnings ESP of +0.56% and a Zacks Rank #3.

The Kroger Co. KR has an Earnings ESP of +3.41% and a Zacks Rank #3.

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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 Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: DSW , DG , KR , PVH


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