Strong Q3, EPS guide slightly light
DG delivered a strong Q3 comp of +4.3% (AE/consensus +3.0%/+2.7%), with hurricane sales adding 30-35bps. Gross margins expanded 8bps (consensus flat), while operating margins contracted 4bps and were ~10bps ahead (ex $24.8m of hurricane costs). Inventories declined 4.9% YoY on a per store basis, significantly below comp growth, potentially implying some inventory imbalance. While FY17 comp guidance was raised to 2.5% (prior ~2%, consensus +1.9%), EPS guidance was only narrowed, with the mid-point below expectations, even excluding the $0.05 net negative storm impact ($4.47 vs. consensus $4.51). A strong comp, but implied Q4 guidance one potential concern.Dollar General is a discount retailer. The company's consumables products includes paper and cleaning products, packaged food, perishables, snacks, health and beauty, pet, and tobacco products. The company's seasonal products include decorations, toys, batteries, small electronics, greeting cards, stationery, prepaid phones and accessories, gardening supplies, hardware, automotive and home office supplies. The company's home products include kitchen supplies, cookware, small appliances, light bulbs, storage containers, frames, candles, craft supplies and kitchen, bed and bath soft goods. The company's apparel includes casual everyday apparel, as well as socks, underwear, disposable diapers, shoes and accessories.
Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
Atlantic provide order execution through a wide range of DMA products and algorithmic trading suites.
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