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Coronavirus Hits Retail Sector: Dollar General Still Worth a Bet

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The rise in coronavirus-infected cases and deaths globally has been leaving indelible impacts on the economy. In the face of the pandemic, the retail sector is witnessing significantly lower revenues on prolonged store closures, supply-chain disruptions, lower traffic trends and limited store operating hours. The rising macroeconomic uncertainties and bare minimum revenue prospects have led companies to withdraw their guidance.

What is seen as a temporary blow to revenues and productivity due to the outbreak may have long-term implications. It is really difficult to gauge the impacts of prolonged store closures on retailers’ financials. The latest Zacks Earnings Outlook shows that the sector’s bottom line is expected to decline 15.2% year over year. Companies are taking every step from pay cut to temporary furlough program and from inventory reductions to curb capital expenditures in order improve financial flexibility and preserve cash flow.

No wonder, U.S. retail and food services sales in March fell 8.7% to $483.1 billion. Sales collapsed across a range of categories from Motor vehicles and parts dealers to Furniture & home furnishing stores and from Gasoline stations to Clothing & clothing accessories stores. However, there were still certain groups that recorded decent numbers. These include Health & personal care stores, Food & beverage stores and General merchandise stores.

Clearly, people are shopping more of essential items rather making any discretionary purchases. Notably, there has been a huge demand for grocery, packaged water, hand sanitizers, tissue paper, cleaning wipes, infant supplies and related staples.



What Makes Dollar General a Stock Worth Picking?

Even amid such crisis Dollar General Corporation (DG - Free Report) looks quite resilient owing to the company’s business model and products it offers, which have been in demand since the outbreak. Notably, shares of this Zacks Rank #2 (Buy) company have gained 16% in the past three months against the industry’s decline of 9.8%. Even the stock has fared far better than the Retail – Wholesale sector and the S&P 500 index that have fallen 2.5% and 17% in the aforementioned period.

The company’s everyday low-price model is anticipated to attract traffic amid the coronavirus outbreak. The company is offering better-for-you products at affordable prices. Additionally, the company is expanding cooler facilities to enhance the sale of perishable items, and rolling out DG digital coupon program and consolidating DG GO app into primary Dollar General app.

Management had earlier announced plans to invest roughly $35 million in bonuses for all store, distribution center and private fleet employees, who have been serving consumers during the time of this pandemic. Also, to meet customers’ burgeoning demand for essential goods and delivery needs the company plans to hire up to 50,000 employees by the end of April.

Dollar General offers a wider selection of merchandise, including consumable items, seasonal items, home products and apparel. Notably, the company’s same-store sales growth story is impressive. Fiscal 2019 was the 30th consecutive year of same-store sales growth for the company. Management expects same-store sales to increase in the range of 2.5-3% for fiscal 2020.

These 3 Stocks Also Worth A Look

Hain Celestial (HAIN - Free Report) has a trailing four-quarter positive earnings surprise of 7%, on average. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sprouts Farmers Market (SFM - Free Report) has a trailing four-quarter positive earnings surprise of 28.7%, on average. The stock sports a Zacks Rank #1.

Build-A-Bear Workshop (BBW - Free Report) reported a positive earnings surprise in the last reported quarter. It flaunts a Zacks Rank #1.

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