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Dollar General Is Getting DESTROYED. Does Today’s 25% Sell-Off Make it Bargain Buy or a Value Trap?

By Stocks News   |   Aug 29, 2024 at 10:02 AM EST   |   Stock Market News
Dollar General Is Getting DESTROYED. Does Today’s 25% Sell-Off Make it Bargain Buy or a Value Trap?

Ever had one of those days where everything that can go wrong does? Like spilling coffee on your shirt right before a big meeting, getting stuck in traffic, and realizing your phone's at 2% (without a charger)? Yeah, that’s basically what Dollar General is feeling right now—except instead of coffee stains, they’re choking on plummeting stock prices and shrinking profit margins.

Let’s set the stage: Dollar General, the go-to spot for small-town America when you need paper towels and a soda for under a buck (now $5 because of inflation), just saw its shares crash by a gut-wrenching 25% (and counting).

So, what’s driving Dollar General’s retail disaster? The aisles might be packed with everything from budget-friendly junk and home decor, but customers just aren’t spending. While essentials like groceries and toilet paper are still flying off the shelves, higher-margin items like electronics, home goods, toys, and apparel are gathering dust. 

Last quarter, home product sales dropped by 7%, toys by 2%, and apparel by 1.3%. The problem? Their core customer base is strapped for cash and spending only on what’s absolutely necessary. In other words, wallets are staying shut tighter than usual.

CEO Todd Vasos attempted to spin the situation, boasting about “advancing operational goals” and a slight increase in foot traffic. But let’s be real—when your big win is that more people are walking into your store, but they’re leaving with fewer items, that’s like saying, “Hey, at least the Titanic got to see some cool icebergs up close.”

And if weak sales weren’t bad enough, Dollar General’s also getting squeezed by new competition. Walmart, Target, and even Chinese e-commerce juggernaut Temu are all gunning for the same budget-conscious consumers, and they’re not playing nice. With these giants cutting prices and offering deals that make Dollar General’s discounts look like a bad joke, it’s no wonder DG is struggling to keep up.

To add insult to injury, just two days before this financial free-fall, the Consumer Financial Protection Bureau (CFPB) dropped a report that doesn’t paint Dollar General in the best light. According to the CFPB, Dollar General, along with Dollar Tree and Kroger, is pocketing about $90 million a year from fees imposed on customers who use their stores to access their own money—a service that most other retailers provide for free.

Let’s break down the numbers. For the second quarter, Dollar General reported adjusted earnings of $1.70 per share on $10.21 billion in revenue. At first glance, that might not sound too bad, but here’s the problem: Analysts were expecting $1.79 per share on $10.37 billion, meaning Dollar General missed earnings by about 5%. Meanwhile, Walmart didn’t just meet expectations—they exceeded them by 7% and even raised their forecast. The contrast makes it clear: Dollar General is falling behind in a big way.

As for the future, things aren’t looking much brighter. Dollar General crossed out its annual earnings per share forecast to a range of $5.50 to $6.20, down from a previous expectation of $6.80 to $7.55. And same-store sales? Yeah, they’re only expected to climb 1% to 1.6% this year.

Here’s the bottom line: Dollar General’s stock has been slapped down nearly 50% from its 52-week high. But here’s why I think it’s a stock with significant upside if you’ve got just a tad of patience. The stock’s P/E ratio is chilling around 12.5, which is way below its five-year average of 20. If that’s confusing to you, it just means this thing is undervalued by historical standards.

Sure, the company’s got some issues to work through—same-store sales are sluggish, and they’ve got customers spending less and less for now. But if they can tighten the screws and get back on track, the upside could be sweet.

Stock.News does not have positions in companies mentioned.

Oh and before I forget, massive high-fives to all our Stocks.News premium members as our explosive alert on Tuesday shot up 160% in less than 72 hours! Could today’s alert follow suit? Only time will tell, but make sure you keep an eye out for the ticker - it’ll be coming to you soon. 

If you’re not a premium member, hurry and upgrade immediately to get in on the action - especially considering that our last three previous “secret alerts” all exploded to peak moves of +110.10%, +96.60%, and +300%... in LESS than 24 hours!  

In the meantime, stay safe and stay frosty friends! Until next time… 

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Disclaimer: Information provided is for informational purposes only, not investment advice. We do not recommend buying or selling stocks. Stock price discussions are based on publicly available data. Readers should conduct their own research or consult a financial advisor before investing. Owners of this site have current positions in stocks mentioned thru out the site, Please Read Full Disclaimer for details Here https://app.stocks.news/page/disclaimer


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