Dollar General Corp.

The stable outlook on Dollar General Corp. reflects S&P Global Ratings' expectation that the company will maintain adjusted leverage around 3x while growing its leading market position within the dollar store segment. We expect the company will successfully execute its operational improvements during the year, resulting in solid earnings and cash flow generation. We forecast FOCF will be in the $1.3 billion to $1.5 billion range annually over the next two years. We could lower our ratings if adjusted leverage approaches the mid-3x area, whether due to deteriorating operating performance or the adoption of a more aggressive financial policy. For instance, a downgrade could occur if increased competition, poor merchandise execution, or overexpansion pressures top-line growth and causes gross margin

...The dollar store sector continues to buck the structural challenges weighing on the rest of the retail industry.Unlike other retailers that are feeling the pressures of e-commerce and facing extensive store closures, Dollar General's rapid store expansion continues unabated. While near-term store saturation appears unlikely in our view, we believe the long-term sustainability of growing store square footage in the mid- to high-single digits is less tenable. Regarding omnichannel, the company plans to pilot buy online, pick up in store later this year. While this could provide management with early learnings, we expect online sales will remain immaterial. We believe the factors that have largely insulated dollar store operators from online disruption, including convenient locations, low average basket size, and preferences and circumstances of its core customer, will persist over the near to medium term. However, the prospect of fixed- and low-income consumer shopping preference trends changing...

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