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Morgan Stanley Raises Target On Dollar General To $102 Ahead Of Q2 Earnings

Morgan Stanley Raises Target On Dollar General To $102 Ahead Of Q2 Earnings - Dollar General Corporation NYSE:DG

Morgan Stanley has reiterated its Overweight rating and increased price target on Dollar General Corp. (NYSE: DG) to $102 from $95, saying that the company's initiatives are gaining traction, providing support to top and bottom line.

"Following recent channel checks, we believe DG initiatives continue to gain traction, lending additional support to the long-term growth outlook," analyst Vincent Sinisi wrote in a note.

Of note, the analyst said the company's key merchandising initiatives include targeting newer customer opportunities, namely male and millennial segments.

"From a gross margin standpoint, continued shrink improvement, private label expansion (including DG's new 'Heartland Harvest' brand), increasing global sourcing and non-consumable product growth are expected to lend support, in addition to supply chain efficiencies," Sinisi noted.

Related Link: There's A New Online Player In The Dollar-Store Space

In addition, Sinisi is impressed to see the new DG16 format earlier this year, with improved signage and increased cooler doors, and looks for further commentary on its traction when the company reports its second-quarter results next month.

"In our opinion, this new layout positions the company well for the 900/1,000 new stores planned for 2016/2017," the analyst elaborated.

Sinisi, who raised his 2017 EPS view to $5.22 from $5.13, forecast annual footage growth of 7 percent and believes that long-term store potential will be enhanced by the smaller format stores.

At time of writing, shares of Dollar General were up 1.79 percent on the day to $93.35.

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