By Senad Karaahmetovic

Today, Dollar General shares rose 14% after it delivered solid results. It also raised its sales guidance.

The Q1 earnings per share (EPS) were $2.41 higher than expected, as compared with $2.82 the previous year and well above analyst estimates of $2.31 per shares. The Q1 net sales were $8.75 Billion, an increase of 4.2% YoY. This is slightly higher than the $8.71 Billion estimate.

“Despite ongoing headwinds due to supply chain pressures and heightened inflation, we remained focused on controlling what we can control and delivered solid financial results, which exceeded our expectations for sales and EPS for the quarter,” DG said in a statement.

Analysts expected a decrease of 1.45% in comparable sales, but they were actually down 0.1%. DG’s gross margin was 31.3%, compared with 32.8% for the previous year and analysts expectations of 31.1%.

“As a result of our strong topline performance and current expectations for the remainder of the year, we are raising our net sales and same-store sales guidance for fiscal 2022.”

DG projects FY 2023 sales growth between 10%-10.5%, compared the 10% forecast. According to DG, EPS growth is expected to be between 12% and 14%.

Dollar General reiterated its forecasts, and even raised some in the face of the tough macroeconomic climate resulting from record high inflation levels and tight supply chain restrictions.

Citi analyst Paul Lejuez saw results as “solid” and expects a positive reaction from shares given “market nervousness.”

“In-line quarter and F22 EPS guidance reaffirmed should calm fears that developed after misses on the cost line at  and …As expected the company faced some margin pressures given the inflationary and freight environment but overall mgmt was able to navigate these challenges,” Lejuez told clients.

Joseph Feldman, a Telsey Advisory Group Analyst, was also positive.

“Like most retailers, Dollar General is facing pressures from lapping the US government stimulus and elevated costs. That said, we expect the business to improve as the year progresses, as consumers continue to increase reliance on Dollar General in this more challenging economic environment… We continue to expect Dollar General’s solid performance to be driven by new stores and remodels and a number of initiatives, including the expansion of cooler doors, DG Fresh supply chain upgrades, Fast Track inventory/labor management, and the expansion of non-consumables initiatives,” Feldman said.