Dollar General (NYSE:DG) Posts Q1 Sales In Line With Estimates, Stock Soars

Jabin Bastian /
2024/05/30 7:06 am EDT

Discount retailer Dollar General (NYSE:DG) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 6.1% year on year to $9.91 billion. It made a GAAP profit of $1.65 per share, down from its profit of $2.34 per share in the same quarter last year.

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Dollar General (DG) Q1 CY2024 Highlights:

  • Revenue: $9.91 billion vs analyst estimates of $9.90 billion (small beat)
  • EPS: $1.65 vs analyst estimates of $1.58 (4.4% beat)
  • Q2 EPS guidance: $1.78 at the midpoint vs analyst estimates of $1.92 (7.6% miss)
  • Maintained full year guidance for sales and EPS
  • Gross Margin (GAAP): 30.2%, down from 31.6% in the same quarter last year
  • Locations: 20,149 at quarter end, up from 19,294 in the same quarter last year
  • Same-Store Sales rose 2.4% year on year (beat vs. expectations of up 1.9% year on year)
  • Market Capitalization: $30.6 billion

“We are pleased with our start to 2024, including top and bottom-line results that exceeded our expectations in the first quarter,” said Todd Vasos, Dollar General’s chief executive officer.

Appealing to the budget-conscious consumer, Dollar General (NYSE:DG) is a discount retailer that sells a wide range of household essentials, groceries, apparel/beauty products, and seasonal merchandise.

Discount Grocery Store

Traditional grocery stores are go-tos for many families, but discount grocers serve those who may not have a traditional grocery store nearby or who may have different spending thresholds. Certain rural or lower-income areas simply don’t have a grocery store. Additionally, some lower-income families would prefer to buy in smaller quantities than available at most stores (think one or two paper towel rolls at a time). While online competition threatens all of retail, grocery is one of the least penetrated because of the nature of buying food. Furthermore, those buying small quantities for immediate need are even less likely to leverage e-commerce for these purposes.

Sales Growth

Dollar General is a behemoth in the consumer retail sector and benefits from economies of scale, an important advantage giving the business an edge in distribution and more negotiating power with suppliers.

As you can see below, the company's annualized revenue growth rate of 8.5% over the last five years was mediocre as it opened new stores and grew sales at existing, established stores.

Dollar General Total Revenue

This quarter, Dollar General grew its revenue by 6.1% year on year, and its $9.91 billion in revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 5.9% over the next 12 months, a deceleration from this quarter.

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Same-Store Sales

Dollar General's demand within its existing stores has generally risen over the last two years but lagged behind the broader consumer retail sector. On average, the company's same-store sales have grown by 2.6% year on year. With positive same-store sales growth amid an increasing physical footprint of stores, Dollar General is reaching more customers and growing sales.

Dollar General Year On Year Same Store Sales Growth

In the latest quarter, Dollar General's same-store sales rose 2.4% year on year. This performance was more or less in line with the same quarter last year.

Key Takeaways from Dollar General's Q1 Results

It was encouraging to see Dollar General top analysts' EPS expectations driven by a same-store sales beat. On the other hand, its earnings forecast for next quarter missed analysts' expectations. The company did maintain its full year guidance, though. Overall, this was a mediocre quarter for Dollar General. The stock is up 7.2% after reporting and currently trades at $149.53 per share.

So should you invest in Dollar General right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.