To The Moon

$Dollar General(DG)$ is scheduled to release its fiscal Q1 2025 earnings before the U.S. market opens on Tuesday, 03 June 2025. A conference call will follow at 9:00 AM ET.

Consensus EPS: Analysts generally expect Dollar General to report earnings of approximately $1.48 per share for Q1 2025. This would represent a year-over-year decline of about 10.9% from the $1.65 reported in Q1 2024.

Consensus Revenue: The consensus revenue forecast for Q1 2025 is around $10.28 billion, which would be an increase of about 3.7% from the year-ago quarter.

Dollar General (DG) Last Neutral Earnings Call Saw Share Price Gained 30.62% Significantly

Dollar General had a neutral earnings call on 13 March 2025 which saw its share price rose significantly by 30.62%.

The earnings call indicates a mixed sentiment. While Dollar General achieved record-breaking sales and managed market share growth, it also faced significant challenges such as store closures, impairment charges, and a decline in operating profit and EPS. The economic pressure on core customers adds to the uncertainty. The company is optimistic about its future plans, but current conditions present notable hurdles.

Dollar General (DG) Guidance

In the Dollar General Corporation's earnings call for the fourth quarter of 2024, the company provided financial guidance for 2025, projecting net sales growth between 3.4% to 4.4% and same-store sales growth ranging from 1.2% to 2.2%. The expected earnings per share (EPS) for the year are between $5.10 and $5.80, with an anticipated effective tax rate of approximately 23.5%. The company plans capital expenditures between $1.3 billion and $1.4 billion to support growth initiatives, including 575 new store openings in the U.S. and up to 15 in Mexico.

Additionally, Dollar General intends to execute approximately 4,885 real estate projects, including 2,000 full remodels and 2,250 Project Elevate remodels. The call also highlighted a focus on improving gross margins through shrink mitigation, targeting a 68 basis point improvement, and managing SG&A expenses, despite anticipated wage inflation of 3.5% to 4%. The company is not planning share repurchases in 2025 but remains committed to maintaining investment-grade credit ratings. Over the long term, Dollar General aims for annual EPS growth of at least 10% starting in 2026 and operating margin expansion towards 6% to 7% by 2028.

Key Factors to Watch in the Q1 2025 Report

For the first time in the company's history, Dollar General delivered fiscal year sales of more than $40 billion, indicating the essential role it serves in over 20,000 communities across the U.S.

Same-Store Sales (Comps): This metric is crucial for gauging the health of Dollar General's existing stores. In Q4 2024, same-store sales increased by 1.2%, driven by average transaction amount despite a decline in customer traffic. Investors will be looking for sustained positive comp growth within the guided range (1.2% to 2.2% for the full year).

Net sales increased by 4.5% in Q4 to $10.3 billion, compared to $9.9 billion in the previous year's fourth quarter.

Gross Margin: Dollar General's gross margin saw a slight decrease in Q4 2024 (down 8 basis points to 29.4%), primarily due to higher discounts, inventory damages, and a greater proportion of sales from lower-margin consumables. The company has been focusing on "shrink mitigation" (reducing inventory loss), which showed a 68 basis point improvement in Q4. Investors will be keen to see if these efforts continue to improve gross margins in Q1.

Operating profit for Q4 decreased by 49% to $294 million, and EPS decreased by 52.5% to $0.87, largely due to charges from the portfolio review.

Consumables vs. Non-Consumables: The shift in sales mix towards lower-margin consumables and away from higher-margin non-consumables (home products, seasonal, apparel) has been a headwind. The Q1 report will show if this trend continues or if there's any rebalancing.

Store Optimization Review and New Store Openings: In Q4 2024, DG initiated a review of its store portfolio, which included plans to close 96 Dollar General and 45 pOpshelf stores, and convert some pOpshelf stores to Dollar General in Q1 2025. This process involves associated charges that impacted Q4 profitability. Investors will look for updates on the progress of these initiatives and their financial impact. The company also plans to open 575 new stores in the US and up to 15 in Mexico in fiscal 2025, along with significant remodels.

Dollar General continued to grow market share in both dollars and units in highly consumable product sales and also grew market share in non-consumable product sales during Q4. The shrink mitigation efforts resulted in a year-over-year improvement of 68 basis points in Q4, with expectations for continued benefits throughout 2025.

Decisions were made to close 96 Dollar General stores and 51 Pop Shelf locations, leading to impairment charges that negatively impacted operating profit by $232 million or $0.81 in EPS.

Consumer Spending Environment: As a discount retailer, Dollar General is sensitive to the economic conditions affecting its core low and middle-income customer base. Inflationary pressures and changes in discretionary spending habits will influence its performance.

The financial situation of Dollar General's core customers has worsened due to ongoing inflation, with many only having enough money for basic essentials.

Same-store sales growth was driven entirely by consumables, while seasonal and apparel categories saw declines.

Cost Management (SG&A): Selling, General, and Administrative expenses increased as a percentage of net sales in Q4 2024. The company's ability to manage these costs, including wage inflation, will be important for overall profitability.

Cash flows from operations increased by 25% to $3 billion in 2024, driven by improved working capital management. Additionally, merchandise inventories decreased by 4% compared to the prior year.

SG&A as a percentage of sales increased by 294 basis points, reflecting higher expenses including retail labor, incentive compensation, and technology-related expenses.

Guidance for the Remainder of Fiscal 2025: Any adjustments to the full-year guidance for sales and EPS will be critical for investor sentiment and stock performance.

Dollar General (DG) Price Target

Based on 25 analysts from Tiger Brokers offering 12 month price targets for Dollar General in the last 3 months. The average price target is $94.02 with a high forecast of $120.00 and a low forecast of $80.00. The average price target represents a -3.84% change from the last price of $100.98.

Full-Year 2025 Guidance (provided in Q4 2024): Net Sales Growth: 3.4% to 4.4%. Same-Store Sales Growth: 1.2% to 2.2%. EPS: $5.10 to $5.80 Zacks Earnings ESP: Dollar General currently has a positive Zacks Earnings ESP of +3.15%, which, combined with its Zacks Rank #3 (Hold), suggests a likelihood of beating the consensus EPS estimate.

Technical Analysis - Exponential Moving Average (EMA)

In the previous fiscal Q4 2024, diluted EPS was $0.87 (down 52.5% YoY), significantly missing estimates due to a $0.81 per share negative impact from the store portfolio optimization review.

The share price have been gaining pretty good positive momentum, though we are seeing consolidation recently, and a dip, this could be due to the potential impact from tariff turbulence, how Dollar General would be managing this headwinds as well as their store portfolio optimization.

With tariffs pause as of now, how Dollar General would be giving in their guidance might give investors a clue on how share price would be moving with the announcement given in the earnings call.

Summary

The Q4 results highlighted the challenges Dollar General faces in improving profitability despite revenue growth. The market will be looking for signs that the store optimization and other strategic initiatives are starting to yield positive results in Q1 2025 and that the company is on track to achieve its full-year guidance.

Appreciate if you could share your thoughts in the comment section whether you think Dollar General would provide an earnings surprise if they are able to give positive results from its store optimization and other strategic initiatives.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.