On Thursday, CFRA adjusted its financial outlook for Dollar General (NYSE:) stock, slightly lowering its 12-month stock price target to $172 from $173, while maintaining a Buy rating on the stock. The revision follows the company’s fourth-quarter earnings report, which reported earnings per share (EPS) of $1.83, down 38% year-over-year but beating expectations by $0.10.
Despite the earnings growth, Dollar General’s profitability fell short of forecasts, and the company’s fiscal 2025 outlook presented a mixed picture.
Dollar General reported a modest 0.7% increase in same-store sales from last year, missing the consensus estimate of a 1.2% decline. However, the retailer’s financial guidance for fiscal 2025 has been adjusted, with margin expansion and earnings per share growth expected to be concentrated towards the end of the year.
The company expects to overcome challenges related to workforce investment and forecasts benefits from supply chain reductions and improvements in the second half of the financial year.
The company’s path to restoring operating margins to 7-8% is expected to take longer than initially expected. This delay is due to ongoing challenges such as declining sales, changing sales mix and a competitive advertising environment. Despite these challenges, CFRA believes Dollar General is on track for profitable growth with the potential to achieve EPS growth of more than 10% in fiscal 2026.
Dollar General is expected to use various strategies to grow margins in the future. These include the expansion of DG Media’s network, increased penetration of private label products and the continued opening of pOpShelf stores, which are seen as long-term drivers of the company’s earnings growth.
These initiatives are part of Dollar General’s broader strategy to improve profitability and shareholder value in the coming years.
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