Dollar General and Dollar Tree both reported earnings today. Both companies operate as discount retailers, which in a world of high inflation tend to perform well. However, Dollar General’s report was easily better than that of Dollar Tree’s.
Dollar General (DG)
Adjusted earnings per share came in at $2.98, which beat analysts’ consensus estimate of $2.94 per DG share. In the past nine quarters, the company has beaten estimates eight times.
In addition, same-store sales increased 4.6% year-over-year, beating estimates of a 3.9% increase. As a result, Dollar General raised its same-store-sales growth outlook for Fiscal Year 2022 from a range of 3%-3.5% to a range of 4%-4.5%.
Furthermore, the gross profit margin expanded from 31.6% to 32.3%, which was driven by higher prices despite a slowdown in demand for discretionary items.
A quick look at TipRanks’ website traffic tool would’ve provided clues that could’ve helped investors anticipate the strong quarterly performance. As per the image below, you can see that Dollar General saw a solid increase in unique visitors, which highlights the shift in consumer spending trends as inflation cuts into spending power.
Is DG Stock a Buy or Sell?
Dollar General has a Moderate Buy consensus rating based on 11 Buys and four Holds assigned in the past three months. The average DG stock price target of $270.46 implies over 10% upside potential.
Dollar Tree (DLTR)
Adjusted earnings per share came in at $1.60, which was in line with analysts’ consensus estimate of $1.60 per DLTR share. In the past nine quarters, the company has beaten or met estimates each time. In addition, same-store sales increased 4.9% year-over-year, but that missed estimates of a 5% increase.
However, the problem with Dollar Tree’s report was that the company lowered its profit guidance for Fiscal Year 2022. Previously, the company had projected an EPS figure in the range of $7.80 to $8.20. Now, the expectation is for EPS to fall somewhere between $7.10 to $7.40.
The driver of this downbeat forecast is price cuts at its Family Dollar stores, as competitors such as Target (TGT) and Walmart (WMT) offer deep discounts in order to clear their inventory levels.
When looking at Dollar Tree’s website traffic, it has a similar pattern to Dollar General. However, there’s a noticeable difference in the increase of unique visitors, as Dollar Tree took much longer to pass its December peak and barely did so. Therefore, investors who compared the website traffic of the two companies could have also anticipated that Dollar General would perform better than Dollar Tree.
Is DLTR Stock a Buy or Sell?
When it comes to Dollar Tree, Wall Street has a Moderate Buy consensus rating based on eight Buys, five Holds, and one Sell assigned in the past three months. The average DLTR stock price target of $173.15 implies over 16% upside potential.
Takeaway – Dollar General is Better than Dollar Tree
It would appear that Dollar General is currently a better operator than Dollar Tree. While Dollar Tree is lowering guidance, Dollar General is raising its forecast while expanding its gross margins. A quick look at the website traffic of each could have helped investors anticipate these results.
Thus, readers should check out the top 10 most visited retail websites.
