Dollar General's (NYSE:DG) strong fiscal first-quarter (ended May 1, 2020) results should come as no surprise to anyone. After all, local authorities deemed it an essential business, allowing its doors to remain open through the pandemic (albeit with altered options, such as reduced hours), unlike other retailers that had to close their physical locations.

Its same-store sales (comps) jumped 21.7% driven by both higher spending and increased traffic. The higher sales drove increased profitability despite elevated expenses related to the coronavirus (e.g., increased bonuses for employees), with Dollar General's diluted earnings per share (EPS) rising 73% from $1.48 to $2.56. Management admits the coronavirus pandemic significantly helped results as people rushed out to buy consumables like paper goods, food, and cleaning products, although it didn't quantify the impact.

The company is not merely temporarily benefiting from the stay-at-home orders, however. Dollar General has several attributes that make it appealing to investors.

An array of bottles in different colors.

Image source: Getty images.

Already doing well

Heading into the pandemic, Dollar General was posting solid comps and earnings increases. Last year, comps rose 3.9%, extending its streak to an incredible 30 consecutive years. Its diluted EPS grew by 11% year over year from $5.97 to $6.64. Dollar General has grown this figure annually since its initial public offering in 2009.

Of course, during the majority of that time, the growth came during a strong economic period. The key question is, how will the company fare during a tough economy?

Results set to accelerate

Like many other companies, management withdrew its guidance for fiscal 2020 due to the uncertainty created by the coronavirus pandemic. However, Dollar General is unique since it believes the company will outperform the sales, comps, and diluted EPS outlook provided in mid-March even if it can't quantify by how much. At that time, management expected 7.5% to 8% sales growth, a 2.5% to 3% comps increase, and an 11.5% diluted EPS rise.

Management noted that most of its customers are value-conscious and are low earners or on fixed incomes. Dollar General's core customer is one of the first to feel the impact of a bad economy, the company admits.

However, the company is in a strong position to do well in the current downturn. Its price point (with the majority of its merchandise selling below $10) is attractive to many unemployed people or those who fear losing their job. Dollar General generates most of its top line (79% of first-quarter sales) from its consumables category. These are everyday items like paper towels, toilet paper, trash bags, milk, eggs, bread, candy, soap, and shampoo -- in other words, the kinds of products people need all the time no matter the state of the economy.

CEO Todd Vasos noted on the first-quarter earnings call how "past recessionary times" have led to increased demand, adding that "we do very good in good times and we do fabulous in bad times." Looking back at the last recession, Dollar General's fiscal 2008 comps rose 9%.

In a sign of confidence, the board of directors declared the second-quarter dividend, although the company decided to hold off on share repurchases. With a 17% payout ratio, it looks like the company can easily handle the payout even if earnings drop.

All signs point to Dollar General continuing to perform well, even in a poor economy. The stock, with a trailing price-to-earnings ratio of 25 times, is not cheap, but finding rare, high-quality companies typically requires paying up a bit.