Dollar General's Q4 Doesn't Halt Dollar Store Rally

Dollar General (DG) sales and guidance fell below Wall Street forecasts, but shares ultimately rallied Monday on the "decent result" amid a difficult economy. 

Goodlettsville, Tenn.-based Dollar General, the largest discount variety chain and operator of more than 10,000 stores, said Q4 earnings per share climbed 11.5% to 97 cents, beating analyst consensus by 7 cents a share. Gross profit margins improved, surprising some analysts. 

Revenue rose less than 1% to $4.adhesive film21 billion, lighter than the expected $4.26 billion. Sales rose 8%, excluding an extra week in Q4 2011. Either way, it was the weakest gain in several years.Bad economic times are a mixed blessing for Dollar General. Pictured is a store in Hialeah, Fla. AP View Enlarged Image 

Adjusted same-store sales rose 3% vs.carbon sheets a year earlier."We grew our market share and invested strategically," Chairman and CEO Rick Dreiling said in a statement. He cited the payroll tax hike and delayed tax refunds as hurting sales. 

Bad economic times are a mixed blessing for Dollar General."When times get tough our customers need us even more," Dreiling said on the conference call. 

Looking ahead, Dreiling expects Dollar General's sales to grow 10% to 12% this year, with same-store sales up 4% to 6%. But he sees EPS of $3.15 to $3.30. The midpoint is below the $3.cc composite27 consensus of analysts polled by Thomson Reuters. 

Investors struggled with Dollar General's results.Clawfoot tub faucets Shares gapped up 5% early to a six-month high, briefly turned negative before closing for a 2% gain on the stock market Monday. 

Dollar General is pushing into tobacco products. That may have hurt Family Dollar Stores (FDO), which fell nearly 2% Monday.Dollar Tree (DLTR) shot up early, but closed up just a fraction.Shares of all three dollar stores sold off sharply in mid-2012. They started to rebound late last month on Dollar Tree's stronger-than-expected results. 

Dollar General's Q4 results weren't perfect but good enough,Clawfoot tubs according to brokers Sanford Bernstein and Nomura Securities."We believe this was a decent result in the midst of a choppy period," Nomura analyst Aram Rubinson said in a client note.