Dollar General Corp. (NYSE: DG) has been one of the stars of a struggling U.S. retail sector in 2017, and that star shone brightly in the third quarter. On Thursday morning, the company reported revenue that topped expectations and mostly maintained its full-year guidance despite taking a hit from hurricanes in the third quarter.
Dollar General reported third-quarter earnings per share of 98 cents, excluding the impact of hurricanes, on revenue of $5.9 billion. Analysts had been expecting EPS of 94 cents on revenue of $5.8 billion.
The company said hurricanes cost it roughly 5 cents of EPS in the quarter.
Looking ahead, Dollar General adjusted its full-year EPS guidance from a previous range of between $4.35 and $4.50 to a new range between $4.37 and $4.47. The new guidance midpoint represents a cut of just a half cent. Dollar General says it expects full-year sales growth of 7 percent, the high end of its previous guidance of between 5 and 7 percent.
The company’s third quarter was better than the market was anticipating, and Dollar General stock rallied by more than 3 percent on Thursday morning.
Deutsche Bank analyst Paul Trussell was not surprised by the strong quarter from Dollar General. Trussell says stores like Dollar General and competitor Dollar Tree (DLTR) are relatively insulated from the factors pressuring most of the retail sector.
“We like sustainable earnings growth stories, and in our view, the discount space is definitely a healthier group,” Trussell said on CNBC.
He says dollar stores are among the few retailers that can compete with the convenience of Amazon.com (AMZN).
“Often 50 percent of the customers at a dollar store [live] within an eight-block radius, and so that, in our view, is probably the only thing that’s more convenient than an Amazon Prime shopping trip,” Trussell says.
Trussell said dollar stores can also serve an important role in the shift in consumer shopping habits away from making single large grocery purchases to buying a handful of items at a time from multiple sources. Trussel also says…
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