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Dollar General stock soars on raised FY'19 guidance, earnings beat

Dollar General Corp. stock surged 8.1% in premarket trading on Aug. 29 after the retailer raised expectations for fiscal 2019, downplayed the risks of tariffs and reported positive second-quarter earnings.

Dollar General now expects net sales growth of about 8%, compared to its previous expectation of about 7%. The retailer now expects same-store sales growth in the low-to-mid 3% range, compared to the 2.5% that was previously expected.

The company reported that adjusted diluted EPS for the quarter ended Aug. 2 rose to $1.74 from $1.52 in the year-earlier period and better than the mean consensus estimate for normalized EPS of $1.58, according to S&P Global Market Intelligence.

Dollar General now expects diluted EPS for fiscal 2019 in the range of $6.36 to $6.51, an increase from a previous range of $6.30 to $6.50, which did not include the impact of significant legal expenses. Dollar General, Dollar Tree Inc. and Family Dollar Inc. have agreed to pay a total of $1.2 million in damages for selling expired products, according to an Aug. 26 announcement from the New York State Office of the Attorney General.

Excluding the after-tax impact of those legal expenses, adjusted diluted EPS for fiscal 2019 should fall within a range of $6.45 to $6.60.

Dollar General said its financial guidance includes the anticipated impact of the increased tariff rates on certain products imported from China, which went into effect May 10, and the additional increase in tariffs expected Oct. 1, Sept. 1 and Dec. 15. Dollar General's updated guidance assumes that it can mitigate, absorb or otherwise offset the impact of these tariffs, the company said.

"Overall, we made solid progress on each of our key initiatives and believe we are well positioned to drive continued growth as we move ahead," Dollar General CEO Todd Vasos said in a statement.

Dollar General also raised its fiscal 2019 outlook for operating profit growth of about 5% to 7%, a bump from the 4% to 6% previously expected and which did not include the impact of significant legal expenses.

Dollar General reported adjusted net income of $450.7 million for the second quarter, an increase from $407.2 million in the year-ago period. Analysts had expected the retailer's net income excluding exceptions to be $407.1 million, according to Market Intelligence.

Net sales increased 8.4% to $6.98 billion from $6.44 billion in the year-ago period, while same-store sales increased 4%. Analysts expected Dollar General to report revenue of $6.89 billion, according to Market Intelligence.

Separately, Dollar General also named Jeffery Owen its COO. Owen has 25 years of retail experience and returned to Dollar General in June 2015 to serve as executive vice president of store operations. Steven Sunderland will succeed Owen as executive vice president of store operations.

The company so far in fiscal 2019 has opened 489 new stores, remodeled 653 stores and relocated 46 stores.

The retailer's board of directors on Aug. 28 declared a quarterly cash dividend of 32 cents per share payable on or before Oct. 22.

Dollar General shares spiked 8.1% in early trading Aug. 29 to $153. The company reported earnings before U.S. markets opened.