DG: Tough to Smoke’em if you Don’t Got’em

Takeaway: DG’s EPS beat this morning is uninspiring. The bottom-line is that the top-line is slowing…

DG’s EPS beat this morning is uninspiring. The key trend to watch continues to be the rate of consumables growth. For the third quarter in a row consumables grew as a percent of sales, but at a decelerating rate sequentially (on a TTM basis).  This trend is notable because 1) consumables tend to be a lower gross margin business – a positive, and 2) they are a key traffic driver – not good. As such, it’s not surprising to see DG post comps +4% shy of expectations+4.6%E in the quarter. In addition, DG’s 4Q comp outlook of +3%-4% vs. +4.3%E suggests continued pressure on the top-line over the near-term.


One of the key factors to consider here is the recent introduction of tobacco at FDO. As one of DG’s chief competitors, this is a notable shift as it’s the only dollar store to sell tobacco to consumers over-indexed to smoking. It’s hardly a game changer for DG today, but when a key competitor needs to shift to Smokes to get its comp, it’s not exactly a positive sign for the space. We continue to think that ‘the consumables shift’, which has been driving comp for both major Dollar Stores, is getting long in the tooth to say the least.


Lastly, with inventories outpacing sales growth this quarter and a tough comp ahead in 4Q (including an extra week), this is not a good setup near-term for DG.

 

DG: Tough to Smoke’em if you Don’t Got’em - DG CatMix

 

DG: Tough to Smoke’em if you Don’t Got’em - DG S

 

 


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more