What Happened?

Shares of discount retailer Dollar General (NYSE:DG) jumped 8.5% in the pre-market session after the company reported decent fourth-quarter results, which beat analysts' same-store sales expectations. While EPS missed, this was due to impairment charges totaling $214 million related to the store portfolio optimization review.

Looking ahead, full-year same-store sales guidance was in line, and the company updated its long-term financial targets, which were constructive.

Still, there were concerns about the consumer's purchasing power and how that might feed into near term growth momentum during the earnings call.

Management noted "Our customers continue to report that their financial situation has worsened over the last year, as they have been negatively impacted by ongoing inflation. Many of our customers report they only have enough money for basic essentials, with some noting that they have had to sacrifice even on the necessities...As we enter 2025, we are not anticipating improvement in the macro environment, particularly for our core customer." Still, this was a good quarter.

The shares closed the day at $79.93, up 6.9% from previous close.

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What The Market Is Telling Us

Dollar General’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 7 months ago when the stock dropped 29.7% on the news that the company reported second-quarter earnings results. Its full-year earnings forecast significantly missed analysts' expectations. Management highlighted concerns similar to some of the retailers that reported during the quarter. The company called out softer sales trends as customers felt financially constrained, In addition, revenue and EPS fell short of Wall Street's estimates during the quarter. Overall, this was a weaker quarter.

Dollar General is up 5.7% since the beginning of the year, but at $79.95 per share, it is still trading 49.9% below its 52-week high of $159.55 from April 2024. Investors who bought $1,000 worth of Dollar General’s shares 5 years ago would now be looking at an investment worth $548.32.

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