Telsey Advisory Group analyst Joseph Feldman reiterated an Outperform rating on the shares of Dollar General CorpDG 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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