Stephanie Link, Chief investment strategist, HightowerDollar General Corp.DGBUYOct 12, 2022

Down 47% in 2023 and an S&P dog. Shoplifting and trouble finding workers didn't help. Also, the economy didn't crumble as expected. The new CEO could turn things around. 

Company has been a "turn around story" the past year. Recent market selloff creating buying opportunity. Stores located across America which creates large footprint for retail sales. 

The question was on his preference between Dollar General and Dollar Tree in the U.S. Dollar General has cratered so it looks like a buying opportunity but actually isn't since it benefited from the pandemic and may just be returning to normal levels. This also causes him to be cautious on Dollar Tree. 

USA dollar store market very competitive. In the Canadian market, DOL essentially has no competitors so he prefers DOL. Ability to compete is hard to predict. Better options for investors in sector. 

The dollar stores have reported disappointing numbers recently, triggering a long sell-off.

Last week, they reported a bad miss and got punished. Maybe they're facing too much competition from Costco's deals.

Its earnings release on June 1, 2023, missing both earnings and sales estimates sent shares significantly lower. The broader markets began moving higher in May as investors felt more confident in the economy and the markets, and consumer staples stocks, which were a safe haven for investors in an uncertain period from 2022, moved lower in May. The move was mostly sentiment and risk-related, until its earnings release in June which sent shares even lower.

We feel its valuation is now more in line with its historical range, and if earnings can meet or beat estimates, we would expect shares to gradually climb back.
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If rates remain high, these retailers will be challenged.  In a recession, he prefers healthcare and utilities (long, fixed contracts).

It is the worst performing consuming name he owns among seven. Has had challenges, fundamentally and technically. Hope things work out.

DG has executed very well but they've been dealing with cost inflation, consumers buying lower-margin consumables vs. discretionary and "shrink" (theft). Owns Dollar Tree, which suffers similar problems, but DT has been introducing more price points as the new CEO restructure, so she sees more potential here.

Recently hit a 52 week low.
Fundamentals better in Canada than USA.
Revenues recently disjointed analysts.
Inflation hitting company hard with rising costs.
Dollarama better investment.
Pass at this time.

They hosted a terrible conference call. DG has lost its way. He wants to ring the neck of management.

They just delivered a horrible quarter, blaming a weak economy, but that's strange because these bargain stores are supposed to thrive when the consumer feels stretched. DG is losing market share in categories like groceries. Three analysts have downgraded them. 

DG shares have been declining since its peak last October at $260, perhaps bottoming in late March around $200 and now trending 10% higher. Though its last quarter was in-line, DG noted that higher-than-expected construction costs to build out its distribution network and more labour costs hampered its operating leverage. Read The dollar wars for our full analysis.