A Mixed Bag
Dollar General Corporation (DG) reported its third-quarter earnings on Friday, November 3, 2023. The company's adjusted earnings per share (EPS) came in at 89 cents, falling short of the consensus estimate of 94 cents. This represents a 29.4% year-over-year decline in EPS.
Despite the earnings miss, Dollar General's stock price rose on Friday. This increase can be attributed to several factors, including positive analyst commentary and the company's "Back-to-Basics" strategy.
Analyst Commentary on Dollar General's Earnings
Analysts offered mixed reactions to Dollar General's earnings report. Goldman Sachs analyst Kate McShane maintained a Buy rating on the stock but lowered the price target from $122 to $104. Bank of America Securities analyst Robert F. Ohmes upgraded Dollar General from Underperform to Buy, with a price target of $95.
McShane noted that Dollar General saw some positive developments this quarter, including increased traffic, larger basket sizes, and share gains with higher-income consumers. Ohmes cited the company's "Back-to-Basics" strategy, which has led to improved inventory management, higher in-stock levels, and better customer satisfaction, as a key driver of future growth.
Dollar General's "Back-to-Basics" Strategy
Dollar General's "Back-to-Basics" strategy focuses on improving the fundamentals of the business, such as inventory management, pricing, and customer service. The company has made significant progress in these areas, which has contributed to its recent stock price increase.
Ohmes believes that Dollar General's "Back-to-Basics" strategy will continue to drive growth and profitability in the coming years. He expects the company to benefit from inventory rightsizing, store remodels, and the launch of new products, such as e.l.f. Beauty products.
Conclusion
Dollar General's third-quarter earnings report was a mixed bag. The company missed earnings expectations, but its stock price rose on Friday due to positive analyst commentary and the company's "Back-to-Basics" strategy. Analysts believe that this strategy will continue to drive growth and profitability in the coming years.