Dollar General Struggles Amid Market Growth: A Look at Recent Performance
Dollar General Corporation (DG), based in Goodlettsville, Tennessee, is a discount retailer known for its wide range of products. The company has a market capitalization of $16.1 billion and offers a variety of items, including consumables like food, cleaning supplies, health products, and non-consumables such as seasonal items.
Stock Performance Highlights
Over the past year, Dollar General shares have notably lagged behind the broader market. The stock has fallen by 40%, while the S&P 500 Index ($SPX) increased by approximately 31.1%. In 2024, DG has seen a decline of 45.6%, contrasting with the S&P’s rise of 24.7% year-to-date (YTD).
Comparative Analysis
When comparing DG’s performance with that of the SPDR S&P Retail ETF (XRT), the difference is stark. The ETF has grown about 24.4% in the last year, with a positive YTD increase of 9.1%, while DG continues to face significant losses.
Challenges Contributing to Underperformance
The struggles faced by Dollar General include heightened margin pressure and difficult consumer conditions. As one of the less successful retailers, DG has been impacted by declining consumer spending and stiff competition, particularly from Walmart Inc. (WMT). Furthermore, the company’s performance has been affected since the beginning of Donald Trump’s presidency due to the potential for import tariffs on Chinese goods, increasing costs for a company that sources much of its inventory from China.
Q2 Financial Results
On August 29, Dollar General’s shares dropped more than 32% following the release of its Q2 results. The company reported revenue of $10.2 billion, which fell short of analysts’ expectations of $10.4 billion. Additionally, its earnings per share (EPS) of $1.70 did not meet the forecasted $1.79.
Outlook for the Current Fiscal Year
For the fiscal year ending in January 2025, analysts predict a 22.5% decline in DG’s EPS, estimating it will be $5.85 on a diluted basis. While its earnings history is mixed—beating estimates in three of the last four quarters—it has experienced significant misses, indicating volatility.
Analyst Consensus and Future Price Targets
Among the 29 analysts following Dollar General, the consensus is a “Moderate Buy,” made up of 10 “Strong Buy” recommendations, one “Moderate Buy,” 16 “Holds,” one “Moderate Sell,” and one “Strong Sell.” This outlook is more optimistic than a month ago, with an increase to nine analysts endorsing a “Strong Buy.”
On November 18, BMO Capital maintained a “Market Perform” rating and reduced the price target for DG to $80, suggesting a potential upside of 8.2% from current levels. The average price target is $95.82, indicating a premium of 29.6% over DG’s present price. The highest forecast price target, set at $125, reflects an ambitious upside of 69.1%.
On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
