Why Dollar General Corp. Stock Dropped Today

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What happened

Shares of Dollar General Corp (NYSE: DG) were down 5.3% as of 1:06 p.m. EDT Thursday after the discount retailer announced mixed second-quarter 2017 results and weaker-than-expected full-year earnings guidance.

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That's not to say Dollar General's results looked bad on the surface. Quarterly revenue climbed 8.1% year over year to $5.83 billion, including a 2.6% increase in same-store sales. On the bottom line, that translated to net income of $295 million, or $1.08 per diluted share, compared with $307 million, or $1.08 per share in the same year-ago period. Analysts, on average, were expecting slightly higher earnings of $1.09 per share on slightly lower revenue of $5.80 billion.

So what

To be fair, note this year's earnings included a $0.02-per-share charge related to Dollar General's June acquisition of 285 new store locations in 35 states from a small-box multiprice-point retailer. The company plans to convert those stores to Dollar General locations by the end of November.

CEO Todd Vasos remained optimistic, stating:

Now what

Dollar General reiterated its full fiscal 2017 outlook for sales to increase by 5% to 7%, but now assumes a change in same-store sales at the high end of its previous guidance for growth ranging from slightly positive to 2%. Dollar General also increased the lower end of its full-year earnings guidance by $0.10 per share, resulting in a new expected 2017 EPS range of $4.35 to $4.50. Even so, analysts' consensus estimates were already modeling full-year earnings of $4.51 per share.

This certainly wasn't a bad quarter from Dollar General, but it's obvious the market was hoping for more even as the company continues to outperform its peers in today's challenging retail environment.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.