DG - Dollar General: Market Is Overlooking Operating Improvements In Turnaround Plan

2024-05-31 10:48:44 ET

Summary

• Dollar General topped estimates and reiterated FY24E guidance. Yet, shares underperformed during the day.
• The market seems to be overreacting to short-term headwinds, while overlooking operating improvements within the "Back to Basics" turnaround plan.
• As a result, at current prices, Dollar General is valued below historical CPI growth on margins below the historical average in the long term.

Investment thesis

In my previous note on Dollar General ( DG ) published on March 20, I mentioned that the market seemed to be overreacting to short-term headwinds, and as a result, failing to properly price in Dollar General shares, despite its historically solid operational performance and initial signs of improvement within the "Back to Basics" turnaround plan. Fast-forward, the company topped once again quarterly estimates and reiterated its full year guidance. Moreover, the company continued to show solid execution with operating improvements. Management also mentioned that the work behind the revamp strategy will continue to gain momentum, especially in the 2H24 and beginning of 2025....

For further details see: