Dollar General: CEO Change Could Assuage Frustrated Investors After Tough 2023

Key Morningstar Metrics for Dollar General

• Fair Value Estimate: $179.00
• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Medium

Dollar General DG announced the departure of Jeff Owen as CEO on Oct. 12, with his predecessor Todd Vasos returning to the role for the foreseeable future. The firm’s press release said the move was effective immediately and designed to “restore stability and confidence.”

The market reacted positively to the news, with Dollar General shares jumping on the news. The company also modestly lowered its fiscal 2023 financial targets, though not enough to meaningfully affect our $179 fair value estimate. We are increasingly confident the firm will address its most glaring underinvestment issues (as exposed in recent media reports) after this leadership change.

Vasos joined Dollar General in 2008 as chief merchandising officer, serving stints as chief operating officer and ascending to the CEO role in June 2015, where he spent more than seven years. During his tenure, he oversaw several years of strong top-line growth, with the firm increasing sales by 80%, market capitalization by more than 100%, and store base by 7,000 units. Given his long history with the company, we do not anticipate a material divergence in Dollar General’s strategy, though we do expect management to prioritize investments more acutely in store renovations and labor moving forward.

Owen’s extended tenure with Dollar General (dating back to the 1990s) ends abruptly, with his short stint as CEO marked by deteriorating demand, excess inventory levels, and intensifying competition, sending shares down a precipitous 50% in the year to date. While we believe the firm’s value proposition and business model remain largely intact, a change in approach could assuage market concerns.