No. of Recommendations: 21
I have the opposite reaction. Dollar General stores have been pretty hit or miss on quality for a very long time, much like the local 7-Eleven or Circle K. If the typical consumer household income for a store is $35, 000, you are not going to get the same shopping experience as you might in a Whole Foods or even Target (particularly at the chain's worst stores from a count of 20, 000). DG has also struggled on the safety front for quite some time.
I grew up relatively poor. I've worked a variety of rough retail and other similar jobs. This included a stint working at the local Wal-Mart. I'll say this: rats and bird shit and unsafely stacked merch at Dollar General conjure up images, to be sure, but they are hardly unique to Dollar General. While there may be a difference of degree, I would not have had a hard time coming up with anecdotes that might fuel a Bloomberg piece on why working at Wal-Mart was the second worst retail job in America (after Dollar General, apparently).
The business press is doing what it always does -- subsequent to gloom brought on by (at least partially justified) price actions, it is building post hoc narratives and selling clicks. Many of these narratives were just as applicable when DG was richly overvalued, and offer little to no explanatory value. But who wants to read a story about the rats at the local Wal-Mart SuperCenter, when WMT is trading at 31 P/E?
To be clear: none of this is to say that DG has been smooth sailing as of late. There is reasons for at least some of the drop in price. Management decided to run up debt up on share buybacks at perhaps the worst possible time (unless you're the retiring CEO & CFO). DG also dropped the ball on pricing in the last year, leading to losing foot traffic to Family Dollar and WMT, and raising issues about management going forward. They've also appeared to drop the ball on labour & labour safety for probably a least a few years now, and are only starting to right the ship (is it enough? hard to say). As an aside, I have not seen much discussion about the fact that the $150 million investment in 'Smart Teams' is really just an admission that they made a mistake in cutting the program (wherein roving employees go store to store to help with stock), which I understand they routinely had in place a few years back.
The business press is doing what they are always doing. They're following the price, not explaining it. It's why Barron's covers and Cramer sell calls are often contrary indicators. The business press loves talking about a stock after a major fall in price, and specifically about how obvious it is that it was a crummy business all along. Doubly so when its an outfit that Dollar General or META, when many readers didn't have much love for the business model in the first place.
