When Dollar General (NYSE:DG) reports third-quarter earnings this week, it's not likely to get the same drubbing suffered by rival Dollar Tree (NASDAQ:DLTR), which missed analyst expectations even though its turnaround efforts at Family Dollar continue to show gains. Dollar Tree's stock has plunged 15% in the past week.

Dollar General doesn't have the drag of trying to right a listing ship, as its own business has been operating at peak levels. There's therefore little reason to expect its financial results will cause its stock price to melt down.

With earnings due out on Thursday, Dec. 5, let's look at what Dollar General investors can expect from the deep discounter.

Stocked store shelves in Dollar General

Making sure shelves remain fully stocked has been a key initiative for Dollar General. Image source: Dollar General.

A focus on lean operations

Dollar General is a different retailer than Dollar Tree. Dollar General has a multiple-price-point business model, while its rival offers a mix of pricing depending upon the store concept you're shopping. Also, Dollar General has a grocery-like brand, DG Market, which sells fresh produce. Operationally, Dollar General is more sound, too.

It launched a number of strategic investments in its business this year that look like they're paying off early, including its decision to bring its supply chain in-house, adding more fresh food to its stores, and introducing more private-label goods.

It allocated some $55 million to these new programs, but the bulk of the money is being spent in two areas: DG Fresh, which allows the retailer to distribute fresh and frozen produce to its stores itself; and Fast Track, a new self-checkout initiative that also has a productivity and efficiency component to it.

Dollar General expects to be shipping from four distribution centers to 5,000 stores by the end of the year, and it's looking for the investment to be accretive to earnings beginning in early 2020.

Profitable sales

Retailers of all stripes often find checkout to be one of the pain points in consumers' experience, and bottlenecks at the register can lead to lost sales through customer dissatisfaction. Right now, Dollar General is piloting self-checkout at select stores and will continue to do so through the rest of the year. But the more important component is the enhanced productivity it should get out of its employees.

Through Fast Track, Dollar General is streamlining the process of getting goods onto store shelves, reducing the amount of out-of-stock items it has by optimizing how trucks are loaded at warehouses and unloaded at store locations, as well as having shelf-ready packaging. If employees aren't wasting time deciding where product needs to go and then having to unbox it, shelves can be filled quicker.

The goal is to drive profitable sales growth, which Dollar General has been doing, especially last quarter, when earnings of $1.74 per share handily beat analyst expectations of $1.54. It's been helped by the addition of larger refrigerator and freezer cases that are driving more store traffic.

Although consumables carry lower margins, they tend to keep customers coming back again and again, making up in volume for what is lost in unit profit.

It's led to exceptional same-store sales growth that also benefits from rising guest counts. Where many retailers see comps grow solely through higher prices or a product mix tilted toward higher-priced goods, Dollar General is also seeing more customers walk through its doors and buy more goods. Its average basket size continues to increase as well.

On track for growth

Analysts forecast sales will grow nearly 8% this quarter, with earnings expected to rise 9.5% to $1.38 per share. Dollar General doesn't provide quarterly guidance, but that's still in line with what it sees in its full-year outlook with sales rising 8% -- an increase from the 7% it previously expected -- and a 10% jump in adjusted EPS growth, also above previous expectations.

Dollar General dodged a bullet when it lost out to Dollar Tree in bidding on the Family Dollar chain, and now its reaping the benefits of not being slowed down trying to correct what had been a seriously ailing business.

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