Did Dollar General Shoot Itself in the Foot?

Despite posting record third-quarter sales and earnings figures, shares of discount retailer Dollar General Corporation (NYSE:DG) closed down over 7 percent on Tuesday. The company’s strong third-quarter performance was offset by its dismal outlook for the fourth quarter.

How Good Were the Earnings?

Third-quarter same-store sales grew a solid 4.0 percent, followed by a 10.3 percent increase in total sales. The company is rapidly growing its presence and opened 479 stores in the first 39 weeks of 2012.

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Operating profit grew 16 percent, and now sits at 9.1 percent of sales. Adjusted earnings per share grew 26 percent year over year to $0.63 per diluted share. Full-year 2012 EPS outlook was revised to a range of $2.82 to $2.85.

How Bad is the Outlook?

Dollar General issued these cautious comments with its earnings release: “We are facing a significant same-store sales comparison from our 2011 fourth quarter, which included very strong January sales, growing near-term pressures that are impacting our customers’ confidence and spending, and a challenging competitive environment.”

The company will share its full-year 2013 financial outlook in March, when it reports fourth-quarter results. Until then, investors don’t seem willing to give the discount-retail industry the benefit of the doubt…

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