The commander of the dollar stores, Dollar General (NYSE:DG), will report Q4 2006 financial results on Monday, March 26. But with a buyout offer on the table, a forecast is an exercise for the interests of Kohlberg Kravis Roberts.

What analysts say:

  • Buy, sell, or waffle? In the wake of the proposed deal, all 15 analysts simply say "hold."
  • Revenues. Revenues are expected to inch higher by 3% to $2.56 billion, which still represents a lot of tcotchkes.
  • Earnings. Profits, though, are on the wane, expected to fall a steep 17% from the year-ago period to $0.38 per share.

What management says:
Management has been exploring "strategic alternatives" since at least its last quarterly report, and while that's usually code for "shopping our assets to the highest bidder," Dollar General had suggested it really had more to do with its real estate and inventory practices. As fellow Fool Timothy Otte explained, the General has been suffering from the need to close down and sell off stores, and it still needs to shed some 400 operations. Moreover, because of a "packaway" process of storing inventory away in the hopes of selling it at some future date, it has on its hands $300 million worth of stock that it needs to write down, which will result in significant charges in the fourth quarter and beyond.

What management does:
With the hamstrung performance of Dollar General, it makes you wonder what KKR sees in the deep discounter. Undoubtedly, it's the low-debt, high cash-generating aspects of the business. While Dollar General only just recently took on more liabilities, its ability to generate large amounts of cash would enable KKR to use that leverage to fund more acquisitions. Whether it will then spin the General back off to the public markets remains to be seen.

Margin

11/05

02/06

05/06

08/06

11/06

Gross

28.8%

28.7%

28.4%

28.0%

27.8%

Operating

6.7%

6.6%

6.1%

5.6%

5.1%

Net

4.1%

4.1%

3.8%

3.4%

2.6%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
All price appreciation is already built into the stock, and little further should be expected unless -- and until -- shareholders approve the deal on which the board of directors has already signed off. It's still useful to watch these buyouts, though, because they can give a sense of the valuations of competitors like Dollar Tree (NASDAQ:DLTR), Family Dollar (NYSE:FDO), and even 99 Cents Only (NYSE:NDN), should it ever get around to filing its financial statements.

Related Foolishness:

Dollar General has earned a two-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the new stock-rating service by joining today. It's free!

Dollar Tree is a former recommendation of Motley Fool Inside Value. A 30-day guest pass lets you see why there's value to be found in the deeply discounted corners of the market.

Family Dollar is a Stock Advisor selection.

Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.