Standard & Poor's upgraded Dollar General
rating by one notch to BBB-minus.
The
action was hardly a shocker - Dollar General was on the agency's latest list of
rising stars, fallen angels published on April 9, one of 23 global companies
that were poised for a return to high grade. S&P had placed the company on
CreditWatch with positive implications back in March.
But the
upgrade is also the result of the company's robust sales, expectations for
future growth as well as its commanding market position as a discount retailer.
"Dollar General's revolutionary
retail-innovations, ample square footage growth potential and strong management
execution continue to deliver out-sized market share gains," Bank ofAmerica Merrill Lynch analysts said in a recent note.
The
analysts do concede that Dollar General typically sells traditional convenience
and some staple foods, and not usually fresh items.
The
expansion in potentially underserved markets as well as its strategy of keeping
its prices in line with cost increases will help position it in the longer run,
Barclays said in a note.
And
while longer term debt reduction might be deferred in lieu of share buybacks,
Barclays says the company's solid free cash flow of around $536mln in 2011, and
estimates of $643mln in 2012 and $949mln in 2014, will allow for a reduction of
its approximately $2.5bln in debt and buttress earnings per share growth.
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