Why Dollar General Stock Only Traded Sideways Today

On the back of slightly discouraging news, Dollar General (DG 0.34%) stock traded down in early action on Thursday before recovering. By the end of the day it had landed in positive territory, but only slightly, closing 0.1% higher in price. At least that was good enough to top the S&P 500 index on the day, as that stock market bellwether fell by 0.2%.

Mixed fortunes

Dollar General's major Thursday news item was its third-quarter results, which were unveiled hours before market open. For the period, the budget retailer managed to increase its net sales by 5% year over year to $10.2 billion, on same-store sales that grew by slightly over 1%.

Traveling in quite the opposite direction was GAAP net income; this landed at $196.5 million, or $0.89 per share, from the year-ago profit of over $276 million for a queasy 29% drop.

This meant a mixed quarter for the company. It beat on the top line, as analysts tracking it were expecting slightly more than $10.1 billion. However, the consensus net income estimate was $0.95 per share.

Acknowledging the fallout from economic worries shared by many Americans during the period, Dollar General nevertheless sounded a bullish note on its performance. It quoted CEO Todd Vasos as saying that "While we continue to operate in an environment where our core customer is financially constrained, we delivered same-store sales near the top end of our expectations for the quarter."

Guidance tightened

Dollar General revised its guidance for full-year 2024. It now expects that net sales will see annual growth of 4.8% to 5.1%; the preceding forecast was looser, at 4.7% to 5.3%. The dynamic was similar with the yearly same-store sales growth estimate -- this is now 1.1% to 1.4%, trimmed from 1% to 1.6%. Finally, net income should come in at $5.50 to $5.90. The company formerly provided a range of $5.50 to $6.20.

Although there were bright spots in the earnings report, it was hard for investors to ignore that scary drop in profitability. Management will have to earn back the market's confidence in light of that.