On Tuesday, Citi reaffirmed its Neutral rating on Dollar General (NYSE:DG) with a consistent price target of $138.00. The firm's analysis suggests that Dollar General's first-quarter earnings per share (EPS) is estimated to be $1.59, which is closely aligned with the consensus of $1.60 and within the company's guided range of $1.50 to $1.60. Comparable sales growth is expected to match the consensus at 1.7%.
The market has shown concern over Dollar General's reliance on lower-income consumers, which has recently put pressure on the stock. However, observations from Walmart (NYSE:WMT)'s report last week indicated steady spending across different income groups, easing some worries about a significant downturn among lower-income shoppers. Walmart's performance also suggests it's continuing to capture more market share.
Traffic data analyzed by Citi does not indicate a slowdown at Dollar General locations. The expectation is that Dollar General's first-quarter performance will likely meet consensus estimates and that management will reaffirm their full-year 2024 earnings projections of $6.80 to $7.55 per share.
The report acknowledges the competitive pressure from Walmart, which is expected to continue gaining market share, a factor that may have affected Dollar General's sales in fiscal 2023.
Additionally, Citi questions the sustainability of Dollar General's aggressive expansion strategy of opening over 800 stores a year as the company strives to strengthen its market position.
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