Dollar General reported third-quarter profit that trailed analysts’ estimates as sales disappointed. The retailer reiterated its commitment to buying smaller rival Family Dollar Stores.
Net income slipped less than 1 per cent to $236.3 million, or 78 cents a share, from $237.4 million, or 74 cents, the Goodlettsville, Tennessee-based discount retailer said today in a statement. Analysts projected 80 cents, the average of 25 estimates compiled by Bloomberg.
The retailer is working to maintain its place as the largest dollar-store chain after Family Dollar’s board rejected its $80-a-share offer in September because of concerns over antitrust approval, and instead stuck with a lower bid from Dollar Tree. Dollar General then put forth a tender offer to Family Dollar’s shareholders, which also placed the potential deal under review by regulators.
Family Dollar investors are scheduled to vote on being acquired by Dollar Tree for $74.50 a share on 23 December. The deal is also under review by the Federal Trade Commission. Family Dollar said in November that it would update shareholders on its dealings with the FTC this week.
Dollar stores have been a bright spot in the brick-and-mortar retail industry, which is suffering amid competition from the Web and reluctance to spend by shoppers as wage gains remain sluggish. It’s one of the few retail categories still opening locations at a brisk pace. Dollar General added about 400 stores in the first half of this year.
New Forecast
Dollar General’s revenue rose 7.8 per cent to $4.72 billion in the period ended 31 October. Analysts anticipated $4.76 billion. Same-store sales -- a closely watched measure -- advanced 2.8 per cent. Analysts projected a gain of 3.2 per cent, according to estimates compiled by Consensus Metrix.
“We expected somewhat stronger” sales given the improving economy and falling gas prices, Taylor Labarr, an analyst for Stifel Nicolaus & Co., said today in a note to clients. He recommends buying the shares.
Bloomberg News, edited by ESM
