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Can Dollar General Stay Afloat in a Volatile Retail Space?

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Dollar General CorporationDG , one of the largest discount retailers in the U.S., is keeping no stones unturned to hold its own in this volatile retail space. The company seems to have gathered momentum from its strategic initiatives.

The company has been evaluating its cost structure for some time now and is trying to improve its financial flexibility to attain long-term growth.

Last month, in order to woo customers, Dollar General came up with special online savings programs, 'Fast Way to Save' digital coupon and 'Wow! Wednesday' special digital coupon, along with other storewide special offers. Customers can save over $200 through these weekly coupons and offers on daily assortments and Halloween favorites.

We believe that the company's commitment toward better price management, cost containment, private label offering, effective inventory management, merchandise and operational initiatives would drive sales and margins. Moreover, in order to increase traffic, Dollar General is focusing on both consumables and discretionary categories.

The roll out of tobacco has been a key traffic driver. In addition, the company is expanding its cooler facilities, to enhance the sale of perishable items.

Additionally, the company has a fabulous comparable-store sales (comps) growth story with fiscal 2014 representing its 25th consecutive year of comps growth. In fiscal 2014, the company posted 1.5%, 2.1%, 2.8% and 4.9% comps growth for the first, second, third and fourth quarters, respectively. Consistently increasing traffic and average transaction value led to 2.8% and 3.7% growth in comps during the second and first quarters of fiscal 2015, respectively.

However, a look at Dollar General's top-line performance, unveils that the company posted lower-than-expected sales in the last eight quarters. In the trailing eight quarters, the company's sales have fallen short of the Zacks Consensus Estimate by an average of approximately 1%. In the last reported quarter, the company generated sales of $5,095.9 million that also came below the Zacks Consensus Estimate of $5,140 million.

Moreover, the company operates in the highly competitive discount retail merchandise sector alongside giants like Wal-Mart Stores Inc. WMT , Big Lots Inc. BIG and Target Corp. TGT . This stiff competition may pressure the company's margins.

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WAL-MART STORES (WMT): Free Stock Analysis Report

DOLLAR GENERAL (DG): Free Stock Analysis Report

TARGET CORP (TGT): Free Stock Analysis Report

BIG LOTS INC (BIG): Free Stock Analysis Report

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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.


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

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