In the upcoming days, esteemed U.S. discount retailers, known as Dollar Tree, Inc. (DLTR) and Dollar General Corporation (DG), will unveil their quarterly earnings reports on the 13th and 14th of March, respectively.
Notable analyst Peter J. Keith from Piper Sandler recently presented a detailed analysis of foot traffic for these companies, shedding light on the potential trends and movements.
Keith’s assessment reveals an encouraging surge in foot traffic for Dollar General in the first quarter compared to the previous quarter. Conversely, Dollar Tree experienced a slight decrease in foot traffic during the same period.
With approximately 7.5% of sales attributed to Supplemental Nutrition Assistance Program (SNAP) benefits at both Dollar General and Dollar Tree’s Family Dollar, Keith emphasized the importance of these benefits in their revenue streams.
While Dollar Tree acknowledged dwindling SNAP benefits impacting Family Dollar in the third quarter, Dollar General did not report the same headwinds in the recent quarter but did mention them in the first quarter of 2023.
Keith maintains an optimistic outlook on Dollar Tree, reiterating an Overweight rating and forecasting a value of $171. He anticipates a fourth-quarter earnings per share of $2.72, surpassing the consensus prediction of $2.67 and the guidance range of $2.58-$2.78.
According to the analyst, Dollar Tree’s core fundamentals seem robust, hinting at a potential acceleration in comparable sales, driven by ongoing multi-price initiatives and enhanced holiday offerings year over year. However, he notes that Family Dollar’s fundamentals weakened in the fourth quarter, aligning with a consensus of 0% in comparable sales guidance.
On the other hand, for Dollar General (with a Neutral rating and a $127 price target), Keith anticipates a fourth-quarter EPS of $1.66, slightly below the consensus estimate of $1.72. He observes an improvement in sales trends during the fourth quarter, hinting at positive momentum for the company.
Keith further highlights that sales trends for Dollar General continue to improve into the early first quarter, as comparisons become more favorable. The implementation of the new Back to Basics strategy by Dollar General’s CEO Todd Vasos is expected to yield positive outcomes through SKU rationalization and a strategic reallocation of labor investment.
Another retailer, Savers Value Village, Inc. (SVV), is also gearing up to report its quarterly results on March 7th. Keith maintains an Overweight rating for the stock with a price forecast of $24.
Price Action: DG shares are currently up by 3.26% at $150.04, while DLTR shares have risen by 1.39% to $148.72 as of the latest check on Friday.
Image via Shutterstock
