Dollar General Rallies New Troops - Research Report on Dollar General Corp.
As Americans pay more taxes and decrease spending, sales in dollar stores like
Dollar General is starting to struggle against growing competition from larger
companies like Wal-Mart
NEW YORK, January 24, 2013
NEW YORK, January 24, 2013 /PRNewswire/ --
The recently concluded fiscal cliff deal will present challenges to certain
retail establishments including dollar stores like Dollar General Corp.
(NYSE:DG) [Full Research Report]^[^1^] due to the imposed tax hikes for the
rich and middle class. The deal says Americans will be paying two percent more
in payroll taxes.
Morgan Stanley says the drag from higher taxes will extend outside discount
retailers, particularly to department stores and specialty-retail stocks. A
Bloomberg BusinessWeek report says an average Dollar General customer earning
$40,000 annually will be required to pay out $800 in additional taxes, or $15
"Dollar stores" were seen to prosper during the recent economic downturn, even
getting to steal away some Wal-Mart customers at one point. Increasing
customers led them to add mid- to high-margin items later on resulting in
increased sales at an average of 5.5 percent in a span of 13 months.
However, customers preferred the lower margin merchandise. Dollar General was
forced to place discounts, resulting in a 0.8 percent decrease earlier this
month to $43.
Nevertheless, the company is still posting profit at $208 million in net
income and sales of $3.96 billion in the third quarter of 2012. Investment
Contrarians still regard the firm's stock as a "buy," saying Dollar General
has "reasonable valuation" and "above average long-term price appreciation
The forecast for the final quarter of the fiscal year, is expected to be
"flattish" and will continue to roll out low-margin items over higher-end
items to "weigh on profit" in 2013, according to Bloomberg. Store sales
meanwhile are expected to be comparable, with increases by 3 to 4 percent.
For fiscal year 2013, the Dollar General plans to open approximately 635 new
stores, including 20 Dollar General Market stores and 40 Dollar General Plus
stores. The company also plans to remodel or relocate around 550 stores.
^[^1^]The Full Research Report on Dollar General Corporation- including full
detailed breakdown, analyst ratings and price targets - is available to
download free of charge at:
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