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Dollar General Q3 Results Top Estimates; Kroger Profit Beats, But Revenue Misses

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Discount retailer Dollar General Corp. (DG) and supermarket chain Kroger Co. (KR) on Thursday reported sharp increases in their quarterly profits on higher sales. While Dollar General's results trounced analysts' estimates, Kroger's earnings beat expectations while revenue fell short.

Dollar General's profit for the third quarter surged 57 percent from last year, reflecting double-digit growth in sales. The company's net income rose to $574.26 million or $2.31 per share from $365.55 million or $1.42 per share in the year-ago period.

Net sales grew 17.3 percent to $8.20 billion from $6.99 billion in the prior-year quarter. Sales were helped by contributions from new stores and growth in same-store sales, modestly offset by the impact of store closures.

On average, analysts polled by Thomson Reuters expected the company to report earnings of $2.00 per share on revenues of $8.15 billion. Analysts' estimates typically exclude special items.

Same-store sales increased 12.2 percent compared to last year. This was driven by an increase in average transaction amount, partially offset by a decline in customer traffic.

Dollar General plans to offer up to $75 million in appreciation bonuses to eligible frontline employees in the fourth quarter, which includes the company's recent announcement to double its initial plans for second-half bonuses by about $50 million.

The company's board of directors declared a fourth-quarter cash dividend of $0.36 per share.

Dollar General did not update fiscal 2020 outlook for sales or earnings per share, due to the difficulty in predicting specific outcomes. The company continues to expect 2,780 real estate projects in fiscal 2020, including 1,000 new store openings, 1,670 remodels, and 110 store relocations.

For fiscal 2021, Dollar General plans to execute 2,900 real estate projects, including 1,050 new store openings, 1,750 remodels, and 100 store relocations.

Supermarket chain Kroger said its third-quarter net income rose to $631 million or $0.80 per share from $263 million or $0.32 per share last year. Adjusted earnings were $0.71 per share, compared to $0.47 per share a year ago.

Total company sales grew 6.3 percent to $29.72 billion from $27.97 billion for the same period last year. Excluding fuel and dispositions, sales climbed 11.3 percent.

On average, analysts expected the company to report earnings of $0.67 per share on revenues of $29.97 billion.

Identical sales without fuel grew 10.9 percent, compared to an increase of 2.5 percent last year. Digital sales jumped 108 percent.

For fiscal 2020, Kroger now forecasts adjusted earnings in a range of $3.30 to $3.35 per share, compared to the prior range of $3.20 to $3.30 per share.

The company expects total identical sales without fuel to increase around 14 percent, compared to its prior outlook for an increase of more than 13 percent.

The Street expects the company to report earnings of $3.30 per share for the year.

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