Dollar General Corp. (NYSE:DG) reported third quarter earnings on Thursday and a continued desire to push for an acquisition of rival, Family Dollar Stores, Inc. (NYSE:FDO). Turning to the earnings announcement, Dollar General reported earnings per share of $0.78, on revenue of $4.72 billion. Analysts were looking for earnings per share of $0.80 on revenue of $4.76 million. While earnings across the board missed analysts’ predictions, earnings per share jumped 8.3% and sales jumped 7.8% from a year ago. Same store sales rose 2.8% and revised full year earnings per share to a range of $3.45 to $3.55.
Dollar General pursuing rivals for an acquisition
As previously stated, Dollar General Corp. (NYSE:DG) is continuing to pursue its interest in purchasing one of its rivals, Family Dollar. Unfortunately, the situation is not as clear cut as it seems. Another dollar store rival, Dollar Tree, Inc. (NASDAQ:DLTR) has already made and signed an offer to buy Family Dollar for $8.5 billion. Family Dollar executives already previously blocked Dollar General’s $80 a share bid for the company, citing antitrust conflicts. However, that has not stopped Dollar General, and the company has said they will revise their offer and provide it to the board and Family Dollar shareholders in time for their December 23, 2014 shareholder meeting.
While mergers and acquisition activity is heating up in the “dollar store” ring, the moves come as the industry is being pressed by other retailers such as Wal-Mart Stores, Inc. (NYSE:WMT) and Amazon.com, Inc. (NASDAQ:AMZN). Wal-Mart, for instance, has introduced a new savings catcher program that will scan a bill and compare all of its prices to the prices of its competitors. If Wal-Mart finds somewhere that sells the same product for less, they will give you a difference on a gift card. Wal-Mart compares its prices to the dollar store chains and this has certainly put pressure on them, as shoppers are being given other reasons to shop at the big box stores.
Dollar General misses estimates; rises YOY
The increase in competition from other dollar store establishments and big box retailers will continue to push for consolidation within the industry and a new business plan. The quarterly earnings report missed estimates for Dollar General Corp. (NYSE:DG), but still rose year over year. However, that may not be enough to stay on top of the industry and a viable competitor in the retail space. Another behind-the-scenes issue for Dollar General is its debt load and relatively small cash load. Debt to equity ratio is at .59 and cash per share is at .57, while there is some long term debt in there, funding acquisitions and paying bills is expensive and Dollar General will need to continue looking at how to raise cash and stay in the “green”.
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