On Friday, Piper Sandler adjusted its price target for Dollar General (NYSE:NYSE:DG) shares, boosting it to $147.00 from the previous $127.00 while maintaining a Neutral rating on the stock. The revision follows Dollar General's recent quarterly financial report, which revealed a slight increase in comparable store sales and earnings per share that exceeded analysts' expectations.
The company reported a 0.7% rise in comparable store sales, contrary to the anticipated 1% decline. Earnings per share for the quarter were $1.83, surpassing the projected $1.73. Despite these positive indicators, Dollar General experienced a decline in gross margin by 140 basis points year-over-year, primarily due to losses from shrinkage and unfavorable product mix.
Management at Dollar General has acknowledged shrinkage as a considerable challenge impacting margins but has also outlined various initiatives to mitigate its effects, with expected improvements in the second half of the year. Additionally, the company has seen significant improvements in inventory levels, changes in labor management, and indications of stabilization in discretionary spending.
However, the company's guidance for 2024 earnings per share stands at $7.18 at the midpoint, which falls below the consensus estimate of $7.42. Piper Sandler notes the early signs of fundamental improvement, such as positive customer traffic, yet suggests that the current valuation of Dollar General's stock reflects a fair balance of these factors.
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