Dollar General Thwarts Earnings Gains With Secondary Offering

Dollar General Corporation (NYSE: DG) managed to handily beat its earnings estimates when you consider that this is a retail stock in the secular theme of dollar stores.  Earnings were $0.63 EPS and sales rose 13% to $3.9 billion versus Thomson Reuters estimates of $0.59 EPS and just over $3.8 billion.

To add to this secular theme, Dollar General is raising its target for 2012, with same-store sales projected at 3% to 5% higher, total sales up 8% to 9%, and operating profits of $1.62 to $1.66 billion.  It is raising its 2012 guidance to $2.68 to $2.78 EPS as well.

While same-store sales rose by 6% it does need to be noted that the boost in the annual guidance is coming more from this past quarter rather than the company boosting guidance by the same amount for each of the next three quarters ahead.  Whether you want to take that as a softening of ‘the upside of trends’ is up to you.

What is not going to come as very welcoming news is that the company is going to unload yet another 25 million shares for the private equity backers.  These sellers have been unloading shares all the way up and so far from 2010 to 2012 each post-secondary drop in the stock has turned out to be a buying opportunity.

Dollar General shares are down 1.7% at $47.68 against a 52-week range of $29.84 to $49.50 and the company’s market capitalization is over $16 billion.

JON C. OGG