Dollar General Q3 Earnings on the Horizon: Drivers to Watch

Dollar General Corporation DG is likely to register an increase in the top line when it reports third-quarter fiscal 2024 results on Dec. 5 before the opening bell. The Zacks Consensus Estimate suggests that the company will achieve revenues of $10.14 billion, marking a 4.6% increase compared to the same quarter last year. 

Despite the expected rise in revenues, Dollar General’s bottom line is likely to have faced challenges. The Zacks Consensus Estimate for earnings per share for the third quarter has slid by a penny to 96 cents over the past 30 days. This figure indicates a decline of 23.8% from earnings reported in the year-ago period.

Dollar General has a trailing four-quarter earnings surprise of 2.8%, on average. In the last reported quarter, the company’s bottom line missed the Zacks Consensus Estimate by a margin of 5%.

See the Zacks Earnings Calendar to stay ahead of market-making news.

Dollar General’s strategic focus on expanding its market share, particularly in the consumable product category, highlights its competitive pricing and strong value proposition, which resonate well with budget-conscious consumers. The company’s proactive pricing strategies and promotional efforts, alongside the ongoing expansion of private brands, are expected to have a positive impact on its revenue growth.

We are optimistic about several key initiatives, including DG Fresh, SKU rationalization, digitization and the expansion of the private fleet, all of which are likely to have driven improvements in same-store sales. Furthermore, the “Back to Basics” initiative, aimed at enhancing store operations and customer service, is anticipated to contribute to same-store sales. We forecast 1% growth in same-store sales for the to-be-reported quarter.

Dollar General has been focusing on enhancing its supply chain through initiatives like improving on-time and in-full truck deliveries. The construction of two new permanent distribution centers in Arkansas and Colorado is expected to have optimized logistics, reduce transportation costs and improve efficiency. 

However, Dollar General faces challenges such as markdown pressures, rising SG&A expenses and potential shifts in consumer spending patterns. These factors highlight the dynamic environment in which the company operates. The company’s efforts to reduce shrink, including changes in self-checkout strategies, are expected to yield results. We expect the gross margin to decline by 80 basis points in the third quarter. 

Furthermore, inflationary pressures on operating costs, including higher wages and logistics expenses, are compressing margins despite efforts to normalize other expenses. We expect SG&A expenses, as a percentage of net sales, to deleverage 50 basis points. As a result, we foresee an operating margin contraction of 120 basis points.

Story Continues