Dollar General Corp. (DG) shares are set to open at a near one-month high Thursday after the discount retailer posted a stronger-than-expected 2018 outlook and boosted its its buyback program by $1 billion after a solid set of fourth quarter earnings figures.
Dollar General said comparable sales for the three months ending in December rose 3.3% to $6.13 billion, matching Street estimates and lifting its bottom line for the quarter to $712.2 million, a 72% increase from 2016 that was mostly fuelled by a $311 million gain linked to last year's changes to the U.S. corporate tax code. The Goodlettsville, Tn-based group said it sees 2018 sales rising by 9% and forecasts earnings of between $5.95 to $6.15 per share, well ahead of analysts' estimates of a $5.60 tally.
"We opened a record 1,315 new stores and delivered a same-store sales increase of 2.7%, marking our 28th consecutive year of positive same-store sales growth. At the same time, we proactively made significant investments in the business that we expect will contribute to sustainable sales and profit growth in the years ahead," said CEO Todd Vasos. "As we move into 2018, we continue to build momentum behind initiatives that we believe will further enhance our strong value and convenience proposition with consumers and drive long-term success."
The company said it will pay a 29 cent dividend for 2017, up 12% from the previous year, and boost its share buyback program by $1 billion.
"Share repurchases for fiscal year 2018 are expected to be approximately $850 million," the company said. "Capital expenditures for fiscal year 2018 are expected to be in the range of $725 million to $800 million."
Dollar General shares were marked 6.78% higher in pre-market trading in New York Thursday, indicating an opening bell price of $95.25 each, the highest in Feb. 16, in a move that would take the stock into positive territory for the year.
Discount stores might be benefiting from a pullback in spending in the broader consumer sector this year. U.S. retail sales fell for the third consecutive month in February, Commerce Department data indicated earlier this week, as wage growth in the economy remains largely flat compared to increases in consumer prices and significant additions to the labor force.[