line growth outlook to 1.3% to 3.3%, from
3.5% to 5%, owing in part to the aforementioned weakening in consumer spending.
We have made substantial cuts to our
estimates for this year and next. Dollar
General has missed consensus expectations in back-to-back quarters, as persistent macroeconomic headwinds are clearly
taking a toll on the discount retailer's core
budget-conscious consumer base. As a result, we have reduced our fiscal 2023 earnings call to $7.80 a share (from $10.20),
implying a year-over-year pullback of 27%.
While we believe the company is still
poised for some recovery in fiscal 2024, we
have also cut next year's estimate to $8.60
a share (previously $11.20).
The stock holds a Below Average (4)
rank for Timeliness. DG has shed 40%
in value since our July report, and is now
showing a loss of about 60% on the year.
While we believe the equity could be nearing oversold territory, near-term investors
may want to wait for signs of sustainable
improvement before initiating a position
here. Our long-term projections suggest
wide recovery potential out to 2026-2028.
Michael Ratty October 20, 2023