Dollar General Corp. (NYSE:DG) early Thursday posted market-beating fourth quarter earnings results, and shares surged in premarket trading despite a tepid 2017 profit outlook.

Written by StockNews.com

The Goodlettsville, TN-based discount retailer reported Q4 earnings per share (EPS) of $1.49, which was $0.08 better than the Wall Street consensus estimate of $1.41.

Revenues jumped 13.7% from last year to $6.01 billion, also topping analysts’ view for $5.96 billion.

DG noted that same-store sales (“comps”) gained 1% from the year-ago period, helped by higher transaction amounts, but hampered by a small decline in traffic. Comps are considered a key indicator of a retailer’s health, since they only measure the year-over-year sales of established locations.

Gross profit edged lower, to 31.6% from 31.8% last year.

Looking ahead, Dollar General’s 2017 outlook was much lower than anticipated. DG forecast full-year EPS $4.25 to $4.50, versus the $4.66 that analysts are looking for. 2017 revenues are projected to rise 4-6%, to $22.87 to $23.31 billion, in-line with Wall Street’s $23.2 billion consensus view. DG also expects comps to be slightly positive to up 2%.

The company commented via press release:

“Dollar General is well-positioned to serve our customers with value and convenience given our plans to open approximately 1,000 new stores in 2017. To strengthen our position for the long term, we are making significant investments, primarily in compensation and training for our store managers given the critical role this position plays in our customer experience, as well as strategic initiatives. While these investments are expected to put pressure on our 2017 earnings, we believe they will strengthen our market share position over time and are positive steps to further support sustainable growth for our shareholders over the long term.”

Despite the lackluster guidance, investors jumped into Dollar General shares following the report, with the stock gaining $3.19 (+4.38%) to $76.00 in premarket trading. Year-to-date, DG had declined -1.70% prior to today’s news, versus a 6.90% rise in the benchmark S&P 500 index during the same period.

DG currently has a StockNews.com POWR Rating of D (Sell), and is ranked #15 of 21 stocks in the Grocery/Big Box Retailers category.