Dollar General share price up, reports annual sales growth ahead of rival merger

Dollar General Corp reported an increase in sales on Thursday but projected modest growth in the year ahead as the market leader is set to face increased competition once its two smaller rivals merge later this year.

The company reported net sales of $18.9 billion for the twelve months ended January 30, up 8% compared to fiscal 2013. Same-store sales, or sales at stores open at least a year, edged up 2.8%, driven by increased customer traffic and a higher average transaction amount.

Last year Dollar General launched a $9.1-billion hostile bid for Family Dollar Stores, which was rebuffed over antitrust concerns, despite the companys willingness to divest as much as 1 500 stores in order to get regulatory approval.

Instead, Family Dollar Stores accepted a $8.5 billion offer from smaller rival Dollar Tree in order to create the biggest discount chain of stores in U.S. with 13 000 stores and an estimated $19 billion in annual revenue. In comparison Dollar General operates 11 789 stores as of January 30.

Net income for the past year came in at $1.07 billion, or $3.49 a share, in fiscal 2014, slightly higher than the $1.03 billion, or $3.17 a share, reported in the previous financial year.

Over the past year, Dollar General repurchased $800 million worth of its shares and today announced that its board has approved an additional $1.0 billion intended for the same purpose to bring the total amount authorized for future repurchases to over $1.2 billion. Additionally, the company said that it will start paying a first-quarter dividend of $0.22 a share as soon as April 22.

For the financial 2015, Dollar General estimated that it will deliver per-share earnings of between $3.85 to $3.95 on a revenue growth of 8% to 9%. In comparison analysts surveyed by Thomson Reuters had projected revenue gain of 9% accompanied with earnings per share of $3.99.

In a separate statement Dollar General said that Chief Financial Officer David Tehle is set to retire on July 1, after almost 11 years on the job. The company said it has started a search for a successor and will consider both internal and external candidates for the open position.

“In 2014, momentum built in our business as we moved through the year, marking our twenty-fifth year of consecutive same-store sales growth,” Chief Executive Rick Dreiling.

Dollar General gained 0.59% on Wednesday and closed at $71.45 in New York, marking a one-year increase of 20.29%. The company is valued at $21.77 billion. On Thursday the stock edged up 3.33% to $73.83 during pre-market trading.

According to the Financial Times, the 19 analysts offering 12-month price targets for Dollar General have a median target of $80.00, with a high estimate of $85.00 and a low estimate of $60.00. The median estimate represents a 11.97% increase from the last closing price.