Dol­lar Gen­eral ben­e­fits as more cus­tomers walk in for small buys

The Pak Banker - - COMPANIES/BOSS -

NEW YORK: Dis­count re­tailer Dol­lar Gen­eral Corp (DG.N) re­ported higher-than-ex­pected growth in quar­terly sales at es­tab­lished stores as more cus­tomers vis­ited its out­lets and they spent more on items such as snacks, to­bacco and home prod­ucts.

Shares of the com­pany, which also fore­cast full-year same-store sales growth largely above an­a­lysts' es­ti­mates, rose as much as 9.4 per­cent to a record high of $82.27 in noon trad­ing on Thurs­day. Larger ri­val Dol­lar Tree Inc's (DLTR.O) shares gained as much as 5 per­cent.

Dol­lar Gen­eral's sales at stores open at least 13 months rose 2.2 per­cent in the fourth quar­ter as lower gas prices and ris­ing wages en­cour­age con­sumers to loosen their purse strings. This growth was stronger than the 1.9 per­cent an­a­lysts on av­er­age had ex­pected, ac­cord­ing to re­search firm Con­sen­sus Metrix.

Dol­lar Gen­eral's per­for­mance was in sharp con­trast to that of Wal-Mart Stores Inc (WMT.N), which re­ported lowerthan-ex­pected com­pa­ra­ble sales for the hol­i­day quar­ter last month, hurt by a strong dol­lar and low prices for gro­cery prod­ucts. Cus­tomers pre­fer Dol­lar Gen­eral's stores to Wal­Mart's "su­per­centers" for small pur­chases, mainly due to the smaller size and con­ve­nient lo­ca­tions of the dis­count re­tailer's out­lets, Ed­ward Jones an­a­lyst Brian Yar­brough said.

"They've (Dol­lar Gen­eral) shown the con­sumer we are con­ve­nient, our prices are com­pet­i­tive with the Wal­marts of the world, much bet­ter priced than the drug­stores, that's where you've seen them take a lot of (mar­ket) share," he said.

Dol­lar Gen­eral plans to open 80 smaller for­mat stores this year in ad­di­tion to the 30 it al­ready op­er­ates, to bet­ter tap densely pop­u­lated ar­eas and ru­ral lo­ca­tions, Chief Ex­ec­u­tive Todd Va­sos said on a post-earn­ings con­fer­ence call.

Over­all, the re­tailer plans to open about 900 stores by Jan­uary 2017. Dol­lar Gen­eral fore­cast full-year same-store sales growth of 2-4 per­cent, largely above the 2.8 per­cent an­a­lysts on av­er­age were ex­pect­ing.

The com­pany also raised its quar­terly div­i­dend to 25 cents per share from 22 cents, and said it would buy back about $1 bil­lion in shares in fis­cal 2016. Dol­lar Gen­eral's net in­come rose about 6 per­cent to $376.2 mil­lion, or $1.30 per share, in the quar­ter ended Jan. 29, beat­ing the av­er­age an­a­lyst es­ti­mate of $1.26 per share, ac­cord­ing to Thom­son Reuters I/B/E/S. Net sales in­creased 7 per­cent to $5.29 bil­lion, but came slightly below the av­er­age es­ti­mate. Dol­lar Gen­eral's shares were up 8.9 per­cent at $81.88, while Dol­lar Tree's shares were up 2.9 per­cent at $78.97.

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