Discount retailers have been falling lower with the broader market this year, but recent earnings reports indicate the weakness may be unwarranted. On-going economic troubles, ranging from slowing global growth to the mounting and unresolved debt issues, threaten to weigh on the economy for the remainder of this year. The onslaught of sour reports has led down the market and negatively impacted shares of such deep discounted retailers as Dollar General Corp (DG), Dollar Tree Inc. (DLTR) and Big Lots (BIG).
Both earnings predictions and share prices for these companies; however, is on the rise. The notion that a deeply discounted retailer would rise during troubled times is easily understood and companies appear to be factoring that into their most recent numbers.
Expectations for Dollar General (DG) are largely bullish with analysts predicting $3.54 billion in revenue for the quarter, a 10.3 percent improvement on the year ago quarter. Annually, analysts anticipate revenue of $14.61 billion for the year or a 12 percent improvement on fiscal 2010’s revenue of $13.04 billion. Shares of the company have risen around 15 percent in anticipating of the improved numbers but the large majority of analysts performing coverage on the stock seem to think it’s still a solid buy at these levels.
Dollar Tree Inc (DLTR) joins Dollar General in seeing considerable improvements for the year. Share prices for the company have climbed 50 percent. The rise could be attributed to Dollar Tree’s impressive fiscal 2011 second-quarter earnings of 77 cents a share, a 26.2 percent rise from the year-ago period of 61 cents a share. The earnings beat expectations. Guidance for the company was highly optimistic. Yesterday it was announced that the company plans to repurchase $200 million in common shares beneath an accelerated share repurchase program. This will take place as a part of a larger, $500 million share repurchase program announced in earlier in the summer.
Big Lots (BIG) for its part has impressed in that it has far surpassed Wall Street Earnings estimated. The company reported adjusted Earnings Per Share of 52 cent on a consensus estimate of 44 cents. Revenue also beat expectations, although narrowly, at $1.17 billion. Big Lots is perhaps most appealing in that it most recently increased its full-year EPS guidance to between $2.80-$2.90. Shares have added 7 percent this year and could go higher if they continue the trend of exceeding Wall Street estimates.