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What: Shares of Dollar General Corp. (DG -0.08%) were sliding today after the discount retailer reported weaker-than-expected results in its second-quarter earnings report.
So what: The dollar-store chain said same-store sales ticked up 0.7% compared to the same period last year, driving an overall revenue increase of 5.8%, to $5.39 billion, but that was short of estimates at $5.49 billion. Customer traffic declined in the quarter, which can sometimes be a warning sign, but that was offset by a higher average transaction. Earnings per share, meanwhile, increased 14%, to $1.08, missing the analyst consensus by a penny.
CEO Todd Vasos said he was pleased with the earnings growth in the quarter but noted same-store sales growth fell short of expectations. Food deflation and a cut in food stamp benefits, as well as intensifying competition, weighed on performance.
Now what: Despite a disappointing quarter, Dollar General was still able to deliver 14% EPS growth in a tough retail environment. Vasos promised "action plans" for the second half of the year to drive same-store sales growth and control expenses.
For the full year, management maintained its EPS growth guidance of 10%-15%, which has been buoyed by a consistent share buyback program. While today's stock dip is a disappointment for investors, dollar stores have shown themselves to be among the most resilient of retailers against the threat from e-commerce, and double-digit EPS growth is better than what many of Dollar General's peers are doing these days. I'd expect the stock to bounce back later in the year.
