Dollar store titan Dollar General (NYSE:DG) is set to release its fiscal third-quarter earnings scorecard next week on Dec. 5 before the markets open for trading. The consumer staples merchant has enjoyed the confidence of investors throughout 2019, with shares appreciating 34% year to date on the strength of vibrant earnings. Let's walk through key numbers and themes that may affect the stock when the company issues its third-quarter report next Thursday.

Top-line and comparable-store sales growth

Dollar General doesn't issue quarterly earnings projections, so each quarter's results should be placed in the context of the company's full-year earnings outlook. Last quarter, the organization raised its fiscal 2019 revenue growth goal from 7% to 8%, and increased its target for comparable-store sales growth from 2.5% to expansion "in the low to mid 3% range."  

In the first two quarters of 2019, revenue has advanced by 8.3% to $13.6 billion, and comps have grown by 3.9% over the prior-year period. So shareholders should expect third-quarter revenue and comps to adhere to this pattern, as the full-year outlook is basically an extrapolation of first-half performance. Any wide divergence from the 7% to 8% sales growth and 3% to 3.5% comps improvement -- positive or negative -- may affect Dollar General's stock price on Thursday. 

A young woman smiles as she removes dollar bills from her wallet.

Image source: Getty Images.

Margins and earnings per share

Despite rising costs due to import tariffs, commodity inflation, and higher freight expense, Dollar General has admirably fended off slippage in its gross margin in 2019. In the first six months of the year, gross margin dipped by just 20 basis points against the comparable period last year, to 30.5%. The company appears to be reaping the rewards of multiple profitability initiatives over the last 18 months. Look for gross margin in the third quarter to remain within a band of one-half a percentage point above or below 30.5%.

As for earnings, Dollar General's fiscal 2019 guidance anticipates diluted earnings per share between $6.36 and $6.51. At the midpoint, this will represent growth of 8% over fiscal 2018's $5.07 in diluted EPS. So far in 2019, total diluted EPS of $3.13 marks a 9% increase over the same six-month period in 2018. For reference, in the third quarter of 2018, Dollar General booked diluted EPS of $1.26.

Caveats on the earnings picture

Given fairly stable earnings over the last several quarters, it's unlikely that Dollar General will surprise investors with a sudden deterioration in current results or a wide revision to its full-year outlook. But investors may be approaching the upcoming report with a degree of wariness, as close competitor Dollar Tree (NASDAQ:DLTR) saw its shares trimmed by 15% on Nov. 26 due to missed earnings expectations and a reduction of its fiscal 2019 profit outlook.

Unless Dollar General slashes its 2019 guidance significantly, it probably won't see such a fierce reaction if it ends up falling short of third-quarter expectations. As I explained in my recap of Dollar Tree earnings, one of the company's main sales growth drivers -- net new store additions -- has been severely crimped as it closes underperforming stores in its Family Dollar segment. This has left it vulnerable to margin compression as costs rise.

Dollar General has no such problem, and is on track to complete 2,075 real estate transactions in fiscal 2019. Of this total, the company aims to open 975 new stores this year (with the balance of projects consisting of store remodels and relocations).

Furthermore, Dollar Tree waited until its third-quarter report to quantify the impact of import tariffs on its full-year earnings projection. Dollar General undertook this task earlier in 2019, so expected tariff impacts have been baked into its fiscal 2019 forecast since March of this year. 

I don't mean to imply that Dollar General is immune to further tariff effects, which it could potentially reveal this quarter. And given the cutthroat world of dollar-store retailing, there's no guarantee that the company's lack of earnings volatility thus far in 2019 will continue this quarter. But overall, Dollar General has kept a tight handle on its operations and finances this year, and it's probable that shareholders will take any reasonable earnings surprise -- on the upside or downside -- in stride.