Dollar General Expected to Outperform Dollar Tree, Reports Say

A recent report suggests that Dollar General's stock is poised for better performance than Dollar Tree over the next several years, amid economic shifts impacting earnings and consumer spending habits.

Date: 22-09-2024

AI Rating: 5

The report compares two retail giants, Dollar General and Dollar Tree, highlighting their historical stock performance and future potential. It underscores the importance of earnings as a predictor of stock price movements, with Dollar General anticipated to recover better than Dollar Tree.

The analysis reveals that Dollar General expects full-year earnings per share (EPS) of at least $5.50, indicating a downturn from previous forecasts but suggesting that it might be finding a bottom. Conversely, Dollar Tree has reported a net loss over the trailing twelve months. This downward trend in profits for both companies is likely to have resulted in their significant drop in stock prices, as Dollar General's EPS has decreased more than 40%.

Moreover, it is suggested that an impending recession, with a 35% chance according to J.P. Morgan Research, may contribute to lower consumer spending which historically impacts Dollar General's earnings negatively. However, Dollar General is addressing internal issues such as bloated inventory and has brought back former management. These steps may help stabilize its financials. Additionally, the company has demonstrated a pattern of returning capital to shareholders, more than its competitor, making it a more attractive option moving forward.

Both companies are experiencing shifts in consumer behavior impacting their sales, as more people are expected to prioritize essential items due to economic pressures. Despite these challenges, Dollar General's proactive steps may enhance its recovery prospects relative to Dollar Tree.

Stocks: DG DLTR