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Dollar General: Facing Troubles on the Horizon

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Dollar General, a current Zacks Rank #5 (Strong Sell), is a discount retailer in the United States offering a wide selection of merchandise, consumable items, seasonal items, home products, and apparel.

Share Performance and Recent Quarterly Results

Dollar General shares have suffered in 2023, cut in half and widely underperforming relative to the general market. The latest two sets of quarterly results soured the opinions of investors, seeing notable selling pressure post-earnings, leading to a 17% increase since their October low. Shares are up 17% since their October low, perhaps reflecting a turn-around in current sentiment among market participants but significant caution is advised until positive earnings estimate revisions roll in and fully support positive price action.

Challenges and Shareholder-Friendly Nature

The reasoning behind DG’s poor share performance is primarily centered around crunched profitability and weaker revenue growth trends relative to prior periods. Same-store sales decreased 0.1% year-over-year in its latest quarterly release, with a decline in customer traffic as the primary driving factor. In addition, the company’s gross profit margin declined from 32.3% to 31.1%, with operating profit also decreasing 25% from the year-ago period. Likewise, the company’s shareholder-friendly nature certainly shouldn’t be overlooked as Dollar General has boosted its dividend payout five times over the last five years, translating to a 17% five-year annualized dividend growth rate. Shares are currently yielding 2.0% annually.

Upcoming Quarter and Conclusion

Keep an eye out for the company’s upcoming quarterly release on December 7th, as the Zacks Consensus EPS Estimate of $1.23 has been taken 46% lower since the end of August and reflects a decrease of 47% from the same period last year. Negative earnings estimate revisions from analysts and crunched profitability paint a challenging picture for the company’s shares in the near term. Dollar General DG is a Zacks Rank #5 (Strong Sell), indicating that analysts have taken a bearish stance on the company’s earnings outlook.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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