Shares of retail chain Dollar General (NYSE: DG) plummeted on Thursday after the corporate reported financial results for the second quarter of 2024. As of this writing, Dollar General stock was down a hefty 30% and trading below $87 — it hasn’t been this low since late 2017.
How bad is it?
Investors are likely reacting to Dollar General’s lower full-year financial guidance. Management had expected to grow net sales by 6% to six.7% in 2024 but now it believes it’s going to only muster growth of 4.6% to five.3%. For perspective, the corporate has annual sales of nearly $40 billion, so even a small percentage change in its growth rate is substantial.
Dollar General’s profitability continues to take successful as well. For perspective, the corporate had full-year earnings per share (EPS) of $10.68 in 2022. But today, management lowered its EPS guidance for 2024 to only $5.50 to $6.20 — that is an enormous drop from profits just two years ago. And with none light at the top of the tunnel, investors are bailing on Dollar General stock, sending it to six-year lows.
Can Dollar General push through its problems?
On the profit side of the equation, Dollar General continues to be working through inventory issues which have led to higher damaged merchandise, higher theft, and better discounts. Management is making changes that may hopefully improve things, but success should still be a number of quarters away.
On the sales side of the equation, Dollar General’s management did share some concerning commentary. Much of its customer base is lower-income. And lower-income consumers have been disproportionately impacted by inflation. Many are struggling to pay their bills, resulting in lower spending.
For my part, Dollar General is not going anywhere. And it trades at a quite low cost valuation today. Investors shouldn’t buy Dollar General stock simply because it’s low cost — if its problems proceed or worsen, it will likely be a nasty investment. But for many who share my view that it’s going to push through its headwinds, this might be a superb entry point for a long-term investment.
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Jon Quast has positions in Dollar General. The Motley Idiot has no position in any of the stocks mentioned. The Motley Idiot has a disclosure policy.
Why Dollar General Stock Plummeted to 6-Yr Lows Today was originally published by The Motley Idiot