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On Thursday, Raymond (NSE:RYMD) James affirmed its Outperform rating for Dollar General (NYSE:DG) shares, maintaining a $100.00 price target. The endorsement comes after the retailer posted its fourth-quarter earnings, surpassing Wall Street’s expectations with an adjusted earnings per share (EPS) of $1.68, which was $0.17 higher than the consensus. According to InvestingPro data, Dollar General currently trades at a P/E ratio of 13.32, suggesting an attractive valuation for this prominent player in the Consumer Staples sector. The stock’s Fair Value analysis indicates it may be undervalued at current levels. The better-than-anticipated gross margin percentage and selling, general and administrative expenses percentage contributed to the strong performance.
Dollar General’s comparable store sales growth of 1.2% modestly beat forecasts, while the gross margin percentage showed resilience, declining only approximately 10 basis points year-over-year despite markdown pressures. The company also reported a roughly 7% year-over-year decrease in inventory per store. With trailing twelve-month revenue of $40.17 billion and a gross profit margin of 29.61%, the company maintains solid operational metrics despite facing a challenging retail environment that has contributed to a 51.57% stock price decline over the past year. Although the fiscal year 2025 EPS guidance of $5.10 to $5.80 fell short of the consensus estimate of $5.84, it is believed that most of the buy-side analysts had already adjusted their expectations to a similar range, anticipating pressure in the first half of the year.
The company’s management outlined long-term targets for the first time since late 2022 when Dollar General’s performance began to falter. These targets include achieving 2-3% comparable store sales growth, operating margins of 6-7% by 2028-2029, and a return to 10% or higher EPS growth starting in 2026. The fourth-quarter results have bolstered the view that Dollar General is on the path to operational improvement.
Further insights and revised estimates from Raymond James are expected to follow the management’s conference call, which was scheduled for 9:00 a.m. Eastern Daylight Time on Thursday. The detailed analysis of the quarter’s results compared to their model will be part of this forthcoming commentary. For investors seeking comprehensive analysis of Dollar General’s turnaround potential, InvestingPro offers an in-depth research report with detailed financial health scores and additional ProTips, part of its coverage of over 1,400 US stocks.
In other recent news, Dollar General reported its fourth-quarter 2025 earnings, surpassing market expectations with an earnings per share (EPS) of $1.68, compared to the forecasted $1.50. The company’s revenue reached $10.3 billion, slightly exceeding the anticipated $10.26 billion, marking a 4.5% year-over-year increase. CFRA analyst Arun Sundaram adjusted the price target for Dollar General shares, reducing it to $84 from $103, while maintaining a Hold rating on the stock. The revision came after Dollar General’s fourth-quarter financial results showed a modest increase in same-store sales of 1.2%, above the 0.9% consensus. Despite this, the company experienced a decline in customer traffic by 1.1%, although the average transaction amount rose by 2.3%.
Looking ahead, Dollar General plans to close 96 of its namesake stores and 45 pOpshelf stores in the first quarter of fiscal year 2026, representing less than 1% of its total store base. However, the company remains on track to open 575 new stores during FY26, aiming for a long-term unit growth of over 2%. Dollar General also reported stabilizing gross margins due to measures taken to reduce shrink, such as eliminating self-checkout lanes and increasing staffing at stores. The company has ambitious targets, aiming for a 10% or higher growth in EPS by fiscal year 2027 and expects operating margins to return to their historical range of 6% to 7% by fiscal years 2029 to 2030.
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