Here’s Why Shares of Dollar General Are Jumping Today

March 10, 2016, 4:00 PM UTC
A Dollar General Corp. Store Ahead Of Earnings Figures
Shopping carts sit outside a Dollar General Corp. store in Princeton, Illinois, U.S., on Wednesday, March 11, 2015. Dollar General Corp. is scheduled to release earnings on March 12. Photographer: Daniel Acker/Bloomberg via Getty Images
Photograph by Daniel Acker — Bloomberg/Getty Images

Discount retailer Dollar General Corp reported a higher-than-expected growth in quarterly sales at established stores as demand increased for items such as candy and snacks, perishables, tobacco and food.

Low gas prices and improving wage growth are supporting a recovery in spending by low-income Americans, Dollar General’s main customer group.

The company’s shares rose nearly 5 percent in premarket trading on Thursday.

Dollar General (DG) also said it planned to open about 900 stores in the year ending January 2017. The company opened 730 stores in fiscal 2015.

Sales at stores open at least 13 months rose 2.2 percent in the fourth quarter as more customers walked into its outlets and spent more per transaction. Analysts on average had expected a growth of 1.9 percent, according to research firm Consensus Metrix.

“Growth in the non-consumable category was broad-based, with notable strength across seasonal and home, offset by a modest decline in apparel,” the company said.

Dollar General’s net income rose about 6 percent to $376.2 million, or $1.30 per share, beating the average analyst estimate of $1.26 per share, according to Thomson Reuters I/B/E/S.

In contrast, bigger rival Dollar Tree Inc reported a lower-than-expected quarterly profit this month, hurt by a strong dollar and challenging economic conditions.

Dollar General’s net sales increased 7 percent to $5.29 billion in the quarter ended Jan. 29, but came slightly below the average estimate of $5.30 billion.

The company, which Dollar Tree dethroned as the biggest U.S. discount store operator by buying Family Dollar last year, also said it planned to buy back about $1 billion in shares in fiscal 2016.

Dollar General’s shares were trading at $78.75 before the bell.

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