Earnings Preview for Discount Retailers: Dollar General, Dollar Tree, and Five Below

Discount retailers Dollar General, Dollar Tree Inc, and Five Below Inc are gearing up to present their third-quarter financial results this week, aiming to capture investors' interest amidst a changing retail landscape.

Dollar General Overview

The company, based in Goodlettsville, Tennessee, is scheduled to release its third-quarter earnings on Thursday, December 5, before the market opens.

Analysts project that Dollar General will report:

• Revenue of $10.15 billion for the third quarter, an increase from $9.69 billion in the same quarter last year.
• Earnings per share (EPS) of 94 cents, down from $1.26 a year ago.

Historically, Dollar General has exceeded revenue forecasts in six out of the last ten quarters and earnings estimates five times in the same period. According to data from Placer.ai, the store saw a 4.8% increase in visits year-over-year during the third quarter, with foot traffic rising consistently across each month tracked.

However, Oppenheimer analyst Rupesh Parikh mentions that expectations for Dollar General are low. He emphasizes concerns over potential downward guidance following the results, pointing to challenges like the impact of hurricanes and persistent macroeconomic pressures.

Parikh commented, "We anticipate another difficult quarter with ongoing challenges in discretionary spending affecting the company’s low-income customer base." He notes that stock performance after earnings reports has been historically lackluster, with shares dropping on the day of earnings reports for the past eight quarters.

Dollar Tree Insights

Dollar Tree, headquartered in Chesapeake, Virginia, will announce its third-quarter results on Wednesday, December 4, prior to the market opening.

Expectations for Dollar Tree's performance include:

• Revenue of $7.44 billion, slightly up from $7.32 billion year-over-year.
• Earnings per share of $1.07, an increase from 97 cents last year.

The company has beaten revenue estimates six times in the previous ten quarters and has met EPS targets in six of those quarters. Data from Placer.ai shows a 5.3% year-over-year increase in store visits for Dollar Tree in the third quarter, indicating positive growth.

In its second-quarter results, Dollar Tree announced it was reviewing strategic options for its Family Dollar brand, which may include selling or spinning off the division. Investors are keen to hear updates on this review during the upcoming earnings call.

Five Below Analysis

Five Below, based in Philadelphia, is set to disclose its third-quarter financials after market close on Wednesday, December 4.

Market analysts expect the following from Five Below:

• Revenue of $795.4 million, up from $736.4 million reported in the third quarter last year.
• Earnings per share of 17 cents, down from 26 cents in the corresponding quarter last year.

Five Below has exceeded revenue estimates in five of its last ten quarters, also surpassing EPS expectations five times. Foot traffic to Five Below stores surged by 13.8% year-over-year in the third quarter, indicating a robust performance potential. The company opened a record 205 new locations last year, contributing to its growth prospects as the 2024 holiday shopping season approaches.

However, Telsey analyst Joseph Feldman recently downgraded Five Below’s stock from Outperform to Sector Perform, adjusting the price target from $102 to $95. He pointed out the challenges presented by shifts in the company’s business model and leadership as factors affecting performance.

"Five Below has navigated previous tariff hikes by raising prices above the $5 mark, impacting perceived value," Feldman noted.

Looking Ahead

According to Placer.ai, visits to both Dollar Tree and Dollar General usually peak after Black Friday, reaching a high in the week leading up to Christmas. This indicates that early insights into the fourth quarter and future guidance will be critical during their earnings announcements.

Similarly, Five Below anticipates increased traffic as Christmas approaches, with Super Saturday often being its busiest day. Last year, traffic on Super Saturday surged 337.3% compared to its average traffic.

Stock Performance

As of Tuesday, here’s how the stocks fared:

• Dollar General saw a 1.62% increase to $79.04, with a yearly range of $72.12 to $168.07; the stock has dropped 43% year-to-date.
• Dollar Tree’s shares decreased by 0.45% to $72.48, with a yearly range between $60.49 and $151.22; the stock is down 49% year-to-date.
• Five Below rose by 4% to $103.20, within a range of $64.87 to $216.18; the stock has declined 52% year-to-date.

Earnings, Retail, Investors