UPDATE: Deutsche Bank Reiterates Buy Rating, Raises PT on Dollar General Corp. on 4Q Results, FY13 Guidance

In a report published Monday, Deutsche Bank analyst Paul Trussell reiterated a Buy rating on Dollar General Corp.

, and raised the price target from $50.00 to $55.00. In the report, Trussell noted, “DG's 4Q results and FY13 guidance were better than feared, in our view, likely leading to modest upside in the shares today. 3 items stand-out in particular: (1) 4Q GPM rose 34 bps YOY, well above our negative 7 bps forecast, as pricing investment and mix pressure were not significant enough to offset the LIFO benefit, transportation efficiencies, and improved IMU; (2) SSS of 3.0% in 4Q (in-line with DB) and guidance for 4.0%-6.0% in FY13 (well ahead of our 3.8% view) suggests that the dollar sector remains positioned to gain further market share of consumables from big box peers as in-store initiatives drive solid traffic, despite macro headwinds; and (3) the company's strong b-sheet continues to support EPS growth through debt reduction and share repurchases. We believe bears will focus on rising inventories (+13% on a per store basis vs. +5.5% in 3Q) and the significant LIFO reserve benefit to margins in 4Q (~53 bps), however, we note that neither were a surprise. In-store initiatives such as the completion of Phase Five, increased home presentation, 300 additional HBA SKU's, and the rollout of tobacco are expected to increase the consumable assortment and negatively impact GPM (we're modeling 51 bps of contraction in FY13) and DG's guidance implies overall EBIT contraction of ~20 bps at the mid-point, accordingly. We reiterate our Buy rating and raise our PT to $55 (from $50).” Dollar General Corp. closed on Friday at $50.07.