Dollar General Earnings Preview

Dollar General

will be reporting its fiscal first-quarter 2011 results tomorrow, June 1, before the opening bell. Investors will be watching to see whether the company can follow up on its record fourth-quarter results and any update on the status of its expansion plans. Analysts are looking for the small town retailer to post earnings of $0.50 per share on revenues of $3.4 billion. That is up from $0.42 per share and $3.1 billion in the same period of last year. The consensus earnings estimate is unchanged from 60 days ago.

Tennessee-based Dollar General operates a chain of more than 9,400 discount stores in 35 states. Its offerings include household products, seasonal items, apparel and food, targeted at low-, middle- and fixed-income shoppers. The company was founded in 1939. The company announced last week that it will open stores in California in 2012, bringing its reach coast-to-coast. Back in March, Dollar General selected Bessemer, Alabama, as the location of its newest distribution center.

So far, analysts expect to see earnings up 14.3% year-over-year and revenues up 9.6% in the second quarter, as well as earnings up 16.8% and revenues up 11.3% for the full fiscal year. Note that analysts have underestimated Dollar General earnings in the past five quarters. Also, competitor Family Dollar

posted record earnings in its second quarter and is expected to post similar per-share earnings in the current quarter.

Dollar General has a long-term earnings per share growth forecast of 16.4% and a return on equity of 16.9%. Its price/earnings-to-growth ratio is 0.9, suggesting that the stock is undervalued. Analysts on average recommend buying DG and have for more than 90 days. Their mean price target is $36.50 per share. The share price ended last week $34.66, just shy of its high since Dollar General went public in 2009. In the past three months, the stock has outperformed larger competitor Walmart

as well as the broader markets.