While Wall Street may be cheering recent gains in the Dow Jones Industrial Average (DJIA), many average families continue to struggle to pay bills in the wake of the horrible recession. Because of this, various discount stores could see solid foot traffic in the near future. That said, today we will discuss Dollar General (NYSE:DG) and touch on other large discount chains that will continue to perform on the earnings front.

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Dollar General Earns Big Bucks
Dollar General sports 7,300 core products and is located in 35 states. Because its stores are accessible to large quantities of working and struggling Americans, and it sells a variety of goods, as opposed to a small selection, it could generate solid foot traffic in the coming year.

Dollar General has been performing on the earnings front too. This past week, it released its fourth-quarter earnings. In the period excluding items, it earned a respectable 51 cents a share. That was well ahead of the 43 cents analysts had been looking for. That could place the company on some institutional radar screens, and potentially drive the shares higher in the coming weeks.

Another plus was that, in the release, it indicated for 2010 it was looking for $1.55-1.63 per share. That is interesting because data indicates that analysts are looking for just $1.56. In short, estimates may ratchet higher from here.

Other Discounters Pulling In the Bucks
Dollar Tree (Nasdaq:DLTR) needs to be included in this conversation. Interestingly, it has beaten Street expectations the last four quarters straight. Also, the Virginia-based discount chain trades at around 14.1 times this year's estimate. That seems like a good deal, mainly because the company is expected to show double-digit EPS growth from this year to the next.

Family Dollar Stores (NYSE:FDO) is another chain that comes to mind. The Charlotte-based company has drawn interest, as it has beaten out bottom-line EPS expectations in the last three quarters. In short, at 15-times this year's estimate, the company seems attractive, and the shares still look like they have some room to rise even from here. Note that if it makes a new 52-week high, it could lure in momentum-oriented investors.

Target (NYSE:TGT) is clearly a well known discount chain with locations in 49 states, plus it has the potential to draw a good deal of foot traffic, thanks to its extensive selection and deep pockets, which allows it to effectively market its huge volume of merchandise to Americans. Over the trailing year, the company has beaten estimates in every quarter, and more positive surprises may be in store for the Minnesota-based retail company.

The Bottom Line
It is probable that if the economy improves, some consumers will become more interested in high-end merchandise and shop higher-end stores. However, for the time being, discount retailers seem well positioned, and this group will perform well this year on the earnings front. (To learn more, check out The Industry Handbook: The Retailing Industry.)

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Tickers in this Article: DG, TGT, DLTR, FDO

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