Dollar General (NYSE:DG) is making it look easy, posting fourth quarter earnings that easily beat analyst expectations on the top and bottom line, and offered guidance for the coming year that came in line with forecasts.

As the discount segment of the retail market continues to shine, Dollar General may be one of its brightest stars. 

Scissors cutting a dollar bill

Image source: Getty Images.

Steamrolling the competition

Dollar General is following a four-pronged approach to growth, encompassing new store openings, adding more non-consumable goods, increasing internal food distribution, and improving store efficiencies. They paid off in the fourth quarter.

Net sales jumped 7.6% to $7.16 billion, up from $6.65 billion a year ago, and outstripping the $7.15 billion gain Wall Street envisioned. Profits also soared 14.1% to $2.10 per share, ahead of the $1.84 per share it notched last year and trouncing analyst projections of $2.01 per share.

CEO Todd Vasos said in a statement, "Our value-and-convenience proposition continues to resonate with both new and existing customers, and our unique real estate footprint remains a competitive advantage."

Those advantages are how Dollar General was able to put up such strong numbers while rival Dollar Tree (NASDAQ:DLTR) only managed to eke out a gain, and then only because of its namesake stores as its Family Dollar chain -- which offers the same value proposition that Dollar General does -- faltered.

Dollar General also posted 3.2% growth in same store sales across all of its product categories of consumables, seasonal, home, and apparel, easily beating the forecast of 2.8% growth, but it also helped the retailer achieve the notable milestone of posting 30 consecutive years of comparable sales growth, a feat few businesses of any kind can boast.

Weathering the storm

While there was some concern the outbreak of COVID-19 might hamper the retailer's performance this year due to supply chain disruptions (a substantial amount of its merchandise comes from China), Dollar General said it doesn't foresee the outbreak having a material impact on its results.

However, it did go on to note it is closely monitoring the situation, and "there is no guarantee that this outbreak will not have a more significant impact on its business."

Yet for fiscal 2020, Dollar General guided sales growth to a range of 7.5% to 8% with same-store sales increasing 2.5% to 3%, generating an earnings increase of 11.5%, all within the ranges the consensus estimates of Wall Street have laid out.

Dollar General also increased its dividend payment to $0.36 per share, a 12.5% increase. It also has $1.1 billion remaining on its share repurchase authorization after having bought back $1.2 billion worth of stock this year at an average price of $145.46 per share. The retailer currently trades at around $152 per share.

Casting a longer shadow

The deep discounter expanded its store footprint in 2019 by opening 975 new locations, ending the year with just under 16,300 stores. It will be accelerating the pace of store openings this year with another 1,000 stores scheduled, while renovating an additional 1,500 existing ones and relocating 80 others.

It plans to bring non-consumable merchandise into 2,600 more stores in 2020, bringing the total to over 5,000 locations as part of its initiative.

As more stores roll out, it will continue to feed the demand of bargain-hungry shoppers looking for a deal while increasing the competitive pressures on its rivals.

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