Dollar General Set For Q1: Analyst Sees Trade-In Momentum, Margin Recovery, Strong Price Gaps Over Rivals

BofA Securities analyst Robert Ohmes reiterated a Buy rating on Dollar General (DG), raising the price target to $115 from $100, anticipating Q1 2025 adjusted EPS of $1.40 and comparable sales growth of 1%. Ohmes expects trade-in programs, digital expansion, and competitor store closures to boost sales, offsetting near-term margin pressures from remodel activity and labor costs, while anticipating margin improvement later in the year.

Analysis

BofA Securities has reiterated its Buy rating for Dollar General Corp (DG), raising the price target to $115 from $100, with the stock currently trading at $101.90 (up 1.25% at publication). The analyst, Robert F. Ohmes, anticipates Q1 fiscal 2025 adjusted EPS of $1.40 and a 1% rise in comparable sales when results are released on June 3, citing real-time sales data that showed acceleration potentially exceeding current flat estimates. This positive outlook is underpinned by expected benefits from maturing trade-in programs, robust digital expansion including partnerships like DoorDash, and market share gains from competitor store closures at Family Dollar, CVS, and Walgreens Boots Alliance. While near-term profit improvements from reduced shrinkage are likely to be offset by costs from store remodels, higher labor expenses stemming from past reliance on self-checkouts, and approximately $20 million in store closure charges, Ohmes forecasts a progressive improvement in margin performance throughout the year. Dollar General's significant price differentiation and digital momentum are also seen as key strengths against competitors.

Key Decisions for Investors

• Investors should consider the analyst's upgraded price target to $115 and maintained Buy rating, supported by expectations of a $1.40 Q1 EPS and 1% comparable sales growth, which indicates potential upside from the current trading price.
• It is advisable to monitor Dollar General's Q1 earnings report on June 3 for confirmation of the reported sales acceleration and further details on the impact of trade-in programs, digital strategy execution, and benefits from rival store closures.
• Evaluate the near-term margin pressures from store remodels, labor costs, and closure expenses against the analyst's projection of progressive margin improvement over the fiscal year, as this dynamic will be crucial for the stock's performance trajectory.