Subject: Re: DG on sale today
They are, in their own niche, apex predators of competition.

They are operationally excellent and based on what I see around my area they seem to target underserved rural areas. Drive around the country side and they pop up in little towns where the only option is a local gas station or two for people needing last minute purchases. I stop in frequently for random items at a couple different DG locations near a lake where we spend time.

What I'm unsure about is how much they can grow store count going forward. They currently have over 19,000 stores in the US, that's more than Starbucks. Sometime next year DG will probably overtake Subway which, I believe, has the most retail locations of any business in the US at just over 20,000. There has to be a cap somewhere and it feels like they may approach it in the next 5-10 years.

None of that is to say I disagree with the likelihood of DG reverting to better multiples in the near future. They can still grow for some time and they will work out of the compressed margins from supply chain disruptions. I haven't bought any DG yet but I'm watching.

I personally like the growth prospects for KMX more. With only ~240 locations I think they have a much longer growth runway towards something like 500-700 locations ultimately.


Jeff