Analyst Note
| Zain Akbari, CFA |Narrow-moat Dollar General’s fiscal fourth quarter fell short of our expectations (1.4% same-store sales decline versus a 1.0% forecast dip), but we still believe it is poised for growth as it capitalizes on its advantaged store footprint and expansion opportunities. We attribute the sales shortfall to a somewhat greater than expected store traffic decline, likely reflecting pandemic-related volatility as case counts spiked and as the chain lapped 13% same-store growth in the prior year’s final period. Management set fiscal 2022 guidance, calling for 12%-14% EPS growth; our 13% target is in range and should not change much. Our $203 per share valuation should rise modestly due to a time value of money-related adjustment, not overly dissimilar from the shares’ 4% trading price pickup after the news. While we suggest prospective investors await a more attractive entry point, our long-term outlook remains favorable (mid-single-digit top line growth rates, high-single-digit adjusted operating margins, on average, over the next decade).