Dollar General's Business Benefits From Continued At-Home Consumption & High Inflation, Says Analyst - Dollar Gen (NYSE:DG)

  • Telsey Advisory Group analyst Joseph Feldman reiterated an Outperform rating on the shares of Dollar General Corp DG with a price target of $285.
  • The analyst believes the business should benefit from strength in consumables with continued at-home consumption and high inflation.
  • Dollar General’s value-priced merchandise seems to appeal to the current consumer, along with strategic initiatives, such as DG Fresh and NCI (non-consumables initiative).
  • Feldman thinks DG’s customers are likely to increase reliance on the company in this more challenging economic climate, which should help performance in 2022. 
  • The analyst believes the company remains well positioned to gain market share, driven by its convenient locations (~75% of stores in rural markets), strong customer relationships, and value-focused, defensive product mix.
  • The analyst expects continued solid performance to be supported by new store openings, remodels, and initiatives including, expansion of cooler doors, DG Fresh supply chain upgrades, Fast Track inventory/labor management, roll out of self-checkout, expansion of NCI, and the launch of a new healthcare service.
  • Also, the consumer tends to seek value in times of elevated inflation and financial duress, which historically has benefited Dollar General and its peers.
  • Feldman sees total Q3 sales growth of 11% to $9.5 billion, with an inline comparable sales of 6.0%.
  • The analyst mentioned that the uptick in consumer spending on food and consumables, inflation, and a focus on savings should drive the growth.
  • DG will report Q3 earnings on December 1, 2022.
  • Price Action: DG shares are trading higher by 0.48% at $257.59 on the last check Friday.
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