Narrow-moat Dollar General delivered fiscal 2024 first-quarter results that slightly exceeded our expectations. However, we do not plan to significantly alter our $145 fair value estimate, as signs of intensifying price competition should remain a headwind to margins.
DG is trading within a range we consider fairly valued.
Price
$136.91
Fair Value
$938.00
Uncertainty
Medium
1-Star Price
$284.45
5-Star Price
$162.80
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say
Bulls
Dollar General is insulated from intense retail competition by its positioning in thinly populated rural towns, which are largely unattractive for most competing retail banners.
Bears
The dollar store footprint looks crowded today—Dollar General, Dollar Tree, and Family Dollar account for over 37,000 storefronts—which could weigh on opportunities to drive growth via store expansion.
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With over 20,000 locations, Dollar General’s banner is nearly ubiquitous across the rural United States. Dollar General serves as a convenient shopping destination for fill-in store trips, with its value proposition most relevant to consumers in small communities with a dearth of shopping options. The retailer operates a frugal store of about 7,500 square feet and primarily offers an assortment of branded and private-label consumable items (80% of net sales) such as paper and cleaning products, packaged and perishable food, tobacco, and health and beauty items at low prices. Dollar General also offers a limited assortment of seasonal merchandise, home products, and apparel. The firm sells most items at a price point of $10 or lower.