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Dollar General Tops Earnings Forecast, Boosts Outlook; Shares Gain

CEO Todd Vasos said "strong underlying performance across the business" at Dollar General was "enhanced by the most recent round of government stimulus".

Dollar General  (DG) - Get Dollar General Corporation Report shares moved higher Thursday after the discount retailer posted stronger-than-expected first quarter earnings, although gains were capped as investors worried that consumers will navigate to higher-end stores as the economy exits the coronavirus pandemic and employment returns to early 2020 levels. 

Dollar General said earnings for the three months ending in April were pegged at $2.82 per share, up 10.2% from the same period last year and firmly ahead of the Street consensus forecast of $2.16 per share. Group revenues, Dollar General said, were essentially flat from last year at $8.4 billion, but again beat analysts' estimates of an $8.23 billion tally.

Looking into the 2021 financial year, Dollar General said it sees net sales in the range o +1% to -1% compared to 2020 levels, with same store sales declining between 3% and 5%. Full-year earnings are forecast in the range of $9.50 to $10.20 per share.  

 "Our first-quarter results exceeded our expectations, reflecting strong underlying performance across the business, which we believe was enhanced by the most recent round of government stimulus payment," said CEO Todd Vasos. "Given our first-quarter outperformance, we are raising our financial outlook for fiscal 2021.”

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“During the first quarter, we executed more than 800 real estate projects, including new store openings in our pOpshelf and larger footprint Dollar General formats," he added. "In addition, we remained focused on serving our customers, while further advancing our key strategic initiatives. Looking ahead, we are excited about our plans and believe we are well-positioned to continue delivering long-term sustainable growth and value for our shareholders.”

Dollar General shares were marked 1.5% lower in pre-market trading immediately following the earnings release to indicate an opening bell price of $203.00 each, trimming its year-to-date gain to around 3.5%. 

Commerce Department data released earlier this month showed April retail sales were unchanged from March at $619.1 billion, well shy of the Street consensus forecast of a 1% gain, as the impact of government stimulus, in the form of the American Rescue Act and its $1,400 checks, faded and consumers pulled back spending in the waning months of the pandemic.

Consumer price increases may have also crimped spending, with April inflation rising 4.2% from last year, according to data from the Bureau of Labor Statistics published earlier this week, the fastest pace since 2009.