Subject: Re: Road to recovery?
I think you have to include competition in the analysis, not just go in to endless detail - often meaningless - about particulars of the financial metrics of DG. And above all, the original thesis here of simply charting all the past movements of the stock relative to earnings is not actual analysis of a business in the cross hairs of extremely capable competition. We basically had years of people saying, "Well it was this to earnings and earnings are going up at X and now it is less than it was so it is a buy." And everybody flocked in unison to buy the stock.

Things are changing. Can DG change and compete? Again it isn't the past stock price and PE comparison that matters only. Gunna have to think beyond the quicky to get to where we are here.

Amazed at the lack of discussion now that the stock price has plummeted!


There actually has been quite a bit of discussion about these issues, but most of it is on the 'Falling Knives' board, not here.

In particular, we have discussed the competitive challenges of DG in relation to Walmart and other more modern retailers, online retail, the gradual shift of DG to consumables in an attempt to bring more traffic through the doors, with the resulting margin compression, problems with shrink, problems with the rapidly increasing cost of labour, problems with tariffs on China, etc. etc. So the discussion has been a fair bit more nuanced than "Well it was this to earnings and earnings are going up at X and now it is less than it was so it is a buy." And lots of people decided not to "flock in unison to buy the stock."

I would say that the competitive threats that DG and the other dollar stores face are very serious, and, in the long run, say over 10-15 years, DG is likely to be a bad investment. But in the short term, say 2-5 years, there may be an opportunity to double earnings and maybe triple the share price. So to me, it's a conundrum - am I confident enough that DG will be able to correct some of its mistakes, and show substantial improvements in the next few years, with a good opportunity for me to take profits in a few years, before the company succumbs to the gradual decline I expect in the long term? My answer has been no, so far, but I would not be at all surprised if things work out well for people investing at today's price.

DTB