Introduction
Founded in 1939, Dollar General Corporation is a U.S. based discount retailer headquartered in Goodlettsville, Tennessee. The company has over 13,000 stores - focusing on rural areas on the eastern, Midwestern and southern states. Its merchandise includes household goods, consumables, and apparel coming from either external manufacturers or their own private brand. Its stock is publicly traded on the New York Stock Exchange (NYSE) and is currently priced at around $93.38, with a market capitalization of $25.52 billion, and an EPS of 4.51 according to Yahoo Finance. Dollar General’s competitors in the discount consumer market include Walmart, Dollar Tree and Target – as well as local discount and convenience stores.
Why is Dollar
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Even though dollar general’s gross margin has been contracting, the company been trying to find solutions such as reducing expenses through budgeting program, lowering transportation costs and cutting unnecessary costs that don’t give value to customer experience. Comparing to other main competitors such as Dollar Tree, Target and Walmart, Dollar General is the only company who is in the range of 30 since year 2009 and has been firmly fixed within that range. Moreover, the drastic enhancement of company’s EPS gives investors solid evidence why dollar general is a good investment. In year 2009, the company starts off with only 0.34; however, it increases to 4.43 in less than a decade. Gross margin is used to determine the liquidity a company has. In addition, comparing the average gross margin of the industry of 29.19 percent to Dollar General of 30.85 in year 2017 and 30.96 in year 2016, …show more content…
Dollar General corporation’s current ratio for 2016 fiscal year is 1.402. While the acceptable range is between 1 and 2, investors normally seek value that is closed to 2 due to the margin of safety; although in the case of Dollar General corporation, a current ratio of 1.4 is acceptable, considering the nature of discount, variety stores sector, which the sector’s average is 1.07 according to Stock Analysis on Net, because consumer merchandises can be liquidated into cash easier compared to other sectors. But against its direct competitor, Dollar Tree corporation, Dollar General falls behind by 0.47. Moreover, Dollar General’s current ratio for its 2016 fiscal year has decreased from 1.72 to 1.40 when being benchmarked against its previous fiscal year in 2015. Despite the negative trends, Dollar General’s financial health is anything but worrying because having a current ratio of 1.40 implies there are more expected cash inflows in the short term. Furthermore, a decreasing current ratio shows its efficient utilization of capital to grow, which supports Dollar General’s initiative to expand its level of operation through opening of smaller format stores and new distribution centers in Texas, Wisconsin, Georgia as well as relocating and remodeling 2,702 stores under their DG16 layout format. The initiative results a 362.27% increase
This requirement makes it important to look through a majority of the return ratios, which include return on sales, return on assets, and return on equity. Additionally, investors are also interested in the ratios related to the company’s earnings, such as earnings per share (EPS) and PE ratio. Looking at return on sales, we can see that Wendy’s has a 7.27% return on sales and Bob Evans has a 1.23%, which demonstrates Wendy’s has a higher profit margin. Moreover, Wendys’ return on assets is 2.85% and Bob Evans is 1.58%. Also, Wendy’s and Bob Evan 's have return on equity ratios of 6.66% and 4.30%, respectively. All of these return ratios show that Wendy’s has a better handle on turning working capital into revenue. On the other hand, although Wendy’s return ratios are higher than Bob Evans, Bob Evans has a better performance on earnings per share and PE ratio. This is due to Bob Evans having less common stock share outstanding, which makes their earnings per share and PE ratio higher than Wendy’s. Due to the EPS being higher for Bob Evans, we would recommend that investors look towards Bob
Speedster Athletics Company has been able to generate favourable gross margins over the last three years consistently over the industry average of 26%. Gross margin is in a declining trend over 2010 to 2011 where 2011 gross margin is 27% (1371/5075*100%) which is 1% lower than 2011, however this is above the industry average level, proving that Speedster company is capable of generating better margins.
Dollar Tree’s acquisition of the Family Dollar stores will better equip them to compete with the leaders in the market such as Wal-Mart, Target, and Dollar General. The acquisition of Family Dollar establishes a new giant of the dollar-discount industry; Dollar Tree will expand significantly to 13,000 stores throughout the United States and Canada (DollarTree.com, 2015). This acquisition also increases Dollar Trees’ access to markets with lower incomes, increases their buying power and their ability to negotiate greater discounts from suppliers while still discovering ways to reduce
Televisory analysed and compared the results of September 2015 quarter with September 2016 quarter. The EBITDA per square foot decreased by 6.8% from USD 12.56 to USD 11.70 as can be seen from the below EBITDA bridge. This decline was still better than the sharp decline at a CAGR of 8.8% over the past 5 years. However, the EBITDA per square foot decreased, the revenue per square foot increased by USD 9.60. The chart beneath shows that the average number of employees per store has increased. This will result in a better customer experience. The inventory turnover period improved from 103 days to 95 days. The below chart depicts that the average revenue per store has also improved. This shows that Finish Line rightly identified the underperforming stores. This, in turn, also improved the cash conversion cycle from 72.1 days to 57.1 days. The EBITDA margin decreased, however, this decrease would have been more if the underperforming stores were still
Target stores, inc.is a sister company of Dayton Hudson Corporation and started in the year 1962 the same year as two other large retail stores Wal-mart and Kmart. Target has always operated with the motto “ Expect More and Pay Less” target is the third in the big three in U.S. falling behind Wal-Mart and Kmart.a major part of target's success comes from its ability to bundle bargain prices with fashionable name brand merchandise with excellent customer service. Dayton’s department store started looking into Target as a discount chain in the year of 1962 when the company saw a rising in public demand for lower priced merchandise in a family friendly and convenient environment. The name target along with the bulls eye logo were selected for the company's visual impact also to show that target aims at offering
On April 4, 2008 Goldman, Sachs & Co. submitted a prepared prospectus for Dollar General Corporation. According to the prospectus, Dollar General is the largest discount retailer in the United States by number of stores. They serve a broad customer base and majority of products are priced at $10 or less and approximately 30% of products are price at $1 or less. They believe that their combination of value and convenience is what has kept them ahead of their competitors since opening in 1955. Dollar General has had substantial growth in recent years, growing their number of stores from 5,540 as of February 1, 2002 to 8,229 as of February 2, 2007. This growth encouraged Richard Dreiling,
Additionally, ‘extreme value’ retailers also impact the rivalry among competitors. Recently, Target, Kroger and others have added dollar sections and major bargains to their format. Price sensitive consumers are attracted to the dollar store grocery deals; also, discount stores such as the 99 Cent Only stores compete on perishable items, such as produce and dairy. They seem to be affecting the supermarkets market share, as described in Retailing in the 21st Century:
Historically, Dollar General operated in a highly price sensitive market segment, with 55% of its consumer base earning an average annual gross income of less than $40,000.[2] To attract these customers, Dollar General employed an Everyday Low Price strategy similar to Wal-Mart’s. Thus, keeping costs low and driving high traffic volumes were critical to the company’s financial success. Dollar General achieved this strategy in several ways, including keeping rents and labor costs low, locating in low-income, high traffic areas that offered consumers few substitutes, and offering a wide variety of popular CPG and white label goods.
Overall, Costco exploits the Porter’s value chain elements to increase the productivity and efficiency of its operations while also lowering the cost of margins related to the operations of the organization (Guo, 2016). These benefits result in different competitive advantages to the company, which in turn increases the profitability of the organization. For each of the Porter’s value elements, the different stakeholders of the company are also impacted positively. Financial Analysis of Costco Table 1:1 Financial Data in Comparison to the Competitors 2016 2015 2014 Costco Revenue 1620 1467 1350 Net Income 76 72
The benefits of these assumptions are that while maintaining the current growth rate of 13%; we can maintain our COGS. One of the major factors contributing to the firm’s poor profit margin is operating expenses.
Overall, Horizontal analysis and financial ratios are essential factors that businesses use to monitor its liquidity. Therefore, in order to improve Apple’s ratios and profitability, the company needs to implement a strategy to increase the company’s liquidity. Business owners or managers should monitor current ratio and acid test ratio as these ratios help us to ensure the company has the proper liquid assets to pay current liabilities, to stay in operations and to expand the company. As we noted in our acid test ratio and current ratio for the company, we show a lower ratio for acid test ratio than the current ratio, which means that the company’s current assets rely on inventory. Therefore, the company needs to convert old inventory into
Few companies create such controversy as Walmart has done with its approach to maintaining low costs for everyday items. People either love Walmart because of this approach to keeping prices down or hate it due to the effects it has on the economy. There are a lot of arguments surrounding the minimum wage and employee rights at Walmart. There seems to always be a news article about some employee protest about the wages or how they are treated. Walmart is viewed as an enormous firm that does not take care of its employees because of its minimum wage, treatment of its employees, and how it deals with lawsuits.
...rtain extent but eventually it will not be enough to continue setting up store after store as a means of deriving a profit. Dollar General will need to consider implementing a few more information technology systems in order to keep their current rate of growth and to continue to grow. With better systems they will be able to better track stock whilst on its delivery path, maintain stock control and minimise theft. These few changes would be bound to achieve more profit and get their desired shrink rate down to 1.75%
Each competitor 's current ratio, quick ratio, and cash ratio are able to be found in this exhibit for the year ended in 2015. McDonald’s currently has a cash ratio of 0.76, a quick ratio of 1.20, and a 1.52. Starbucks has a cash ratio of 0.44, a quick ratio of 0.64, and a current ratio of 1.19. Finally, the Dunkin Brand Group Inc. has a cash ratio of 0.59, a quick ratio of 0.74, and a current ratio of 1.25. When looking at these ratios one is able to find that compared to its competitors, Starbucks is less liquid than McDonald 's and Dunkin Brand Group
The gross profit margin is at 27% which is a percent higher than industry standards. The company is performing good and meeting industry standards in terms of cost of goods sold and sales volume. The net income margin decreased to 0.7% in 2003 a decrease of 0.3% compared to 2002.