Halls of Shrewd'm / US Policy❤
No. of Recommendations: 1
and decriminalizing theft in major American cities. Last year when I raised the shrink issue, several posters, implied my posts were, political, had racial overtones,etc. The consistent theme on these boards for decades has never changed, several experts, know everything. Those who, accused me, will never man up and apologize, welcome to message boards. Good luck to all! " Aug 31 (Reuters) - Dollar General(DG) cut its annual sales and profit forecasts on Thursday, hurt by a decline in store traffic and the discount retailer's move to sell more low-margin essentials over discretionary products.
Shares of the Goodlettsville, Tennessee-based company, down about 36% this year, fell 14% premarket.
U.S. consumers, particularly in low-to-middle-income groups, have been feeling the pinch as reductions in government funding and lower tax refunds worsen inflationary pressures.
The company said gross profit as a percentage of net sales was down 126 basis points in the second quarter from last year, driven by lower inventory and increased shrink, as well as inventory damages.
The discount retailer now expects fiscal 2023 same-store sales in the range of a 1% decline to 1% growth, compared with its prior outlook of an increase of 1% to 2%. Analysts on average were expecting a growth of 1.45%, according to Refinitiv IBES data.
For the year, adjusted earnings per share are forecast in the range of $7.10 to $8.30, or a decline of 34% to 22%, from a flat-to-8% decline in the prior outlook. (Reporting by Savyata Mishra in Bengaluru; Editing by Pooja Desai)"
No. of Recommendations: 0
The cancer impacting American retail on so many levels. ' Shares of Five Below Inc. (FIVE) dropped more than 5% in the extended session Wednesday after the retailer reported second-quarter sales that missed Wall Street expectations and tweaked its guidance for the year to account for "shrink," or the loss of items usually attributed to theft, fraud or employee error. Five Below earned $46.8 million, or 84 cents a share, in the quarter, compared with $41.3 million, or 74 cents a share, in the year-ago quarter.'
No. of Recommendations: 1
DLTR last quarter: 'While we are maintaining our full-year 2023 sales outlook, we are adjusting our EPS outlook as we expect the elevated shrink"
https://www.pymnts.com/earnings/2023/dollar-tree-l...---
DLTR current quarter: elevated shrinkage - see slide 7
https://corporate.dollartree.com/_assets/_a84ca29b...---
Foot Locker, Kohl's, Dick's Sporting Goods, Home Depot, Walmart, Target:
https://www.ft.com/content/316005a1-1796-43f2-9573..."Foot Locker has warned that elevated levels of theft will continue to weigh on its results for the remainder of the year, with the US sneaker store chain among retailers to this month flag the problem as they continue to grapple with a broader slowdown in consumer spending on discretionary items."
"In the past week, several US companies including discount retailer Kohl's, Foot Locker, Dick's Sporting Goods, Home Depot, Walmart and Target have raised the issue of or fielded analysts' questions on shrink."
No. of Recommendations: 7
Luxmain, thank you, obviously you have posting skills, that an old man in his mid 70s, doesn't have. All this theft is breaking down retail employees. Several months ago a 20 year employee at my favorite grocery store that I have been visiting for 20 years, came over and whispered, just put your things in the bags, don't scan them and walk out. I said why? She said, it's 8 am, and 5 shoppers have already walked out without paying. You have been shopping here for 20 years why should you pay? I paid, but, how do you cure that issue? Have a grand day.
No. of Recommendations: 1
> I paid, but, how do you cure that issue?
Yikes. One cure is probably to get staff involved in the bottom line somehow - equity ownership, awareness of balance sheet for the local store - as well as hiring strongly ethical people.
But hiring decent, ethical people to a low paid low status job requires flexibility somewhere else; flexibility on working hours, on pay, on human factors (do US stores require checkout assistants to stand all the time? that would be outrageous in europe).
No. of Recommendations: 1
I have family and friends in retail. Better yet, I visit the stores and chat with employees, if you can find one in the dollar stores. Moral is broken, 16-20 $$ an hour employees are not living large, they are struggling to survive in their own lives. They see all this theft go unchallenged, does that promote , inside theft? Did the cashier who advised me to, nag em and walk out without paying, call three friends to do it? You can't put smart chips in dollar items. Home Depot ,Lowe's, etc can fight back but dollar stores, what can they do? The, honor system, doesn't work very well in todays America. 🥲
No. of Recommendations: 0
' But hiring decent, ethical people to a low paid low status job requires flexibility somewhere else; flexibility on working hours, on pay, on human factors (do US stores require checkout assistants to stand all the time? that would be outrageous in europe).'' lol, I have never seen an employee sitting by the scanners, that includes, Costco, Walmart, and my local grocery stores. In Europe the employees , sit, and watch the shoppers scan ?
No. of Recommendations: 1
No. of Recommendations: 2
' No scan, no checkout, technology is the solution' very cool technology but you are talking serious cap ex to refit 20,000 stores. Criminalizing stealing might help.
No. of Recommendations: 0
<' No scan, no checkout, technology is the solution' very cool technology but you are talking serious cap ex to refit 20,000 stores. Criminalizing stealing might help.>
True. In most areas of the US, I think 'will be caught' would be enough to stop shoplifting. Capex should get cheaper overtime.
No. of Recommendations: 25
It's clear that I'm always wrong.
Why, only four days ago I said "I imagine their upcoming quarterly release is likely to be weak, with new weak surprises. They have certainly telegraphed it enough. "
The thing that bothers me about the shrink is that it's low.
If shrink were high, it would be comforting: we know there is a problem and we know what it is.
US retail shrink is higher than the last couple of years, maybe 1.6% of sales this year, maybe even 1.65%, versus about 1.4% in the last couple of years. But it was 1.6% in 2019 and 1.75% in 2000.
For me the message is that the problem is not shrink--shrink is being used as a fashionable excuse for weak earnings releases.
So what is the real problem?
One possibility is not so bad: retail is simply hurting because a recession is coming soon. Times are getting tougher, and perhaps they don't in general have the right mix of products for early recession part of the cycle.
Admittedly the rise of organized retail crime is bad, as there is no obvious fix for it that doesn't cost almost as much as the losses. But it's very small compared to the size of the overall business.
As for stopping buybacks, that is very annoying to say the least. It's the main silver lining from low market prices.
That leaves them with the problem of what they'll do with this year's (still huge) profits. I presume they will retire a lot of the debt coming due this year rather than roll it?
Jim
No. of Recommendations: 0
Makes sense with higher interest rates.
No. of Recommendations: 0
DG has been fairly well analyzed by a bunch of smart people here. Anyone buying more today?
No. of Recommendations: 5
I added, but then again I am not smart
No. of Recommendations: 5
I added, but then again I am not smart
Same. $131.79
Jim
No. of Recommendations: 1
For me, there are two main concerns for the DG business over long term:
1. Merchandise price (used to be $1, now maybe $5) relative to shipping cost (which actually came down over the past decade due to technology and more efficient shipping network) will keep increasing, to a point where the business could be threatened by online shopping. Instance gratification works only on a subset of products.
2. "no scan, no cashier" technology may introduce new competitions, such as the Amazon Go store shown in video in previous post.
No. of Recommendations: 1
Me three
I increased my holdings by 23% in the premarket; beat Jim by a few cents 131.75
:)
No. of Recommendations: 1
Can I ask what your average cost is for DG you own?
Is the $130 range getting close to a pound the table price, or has this new report caused too much doubt to pound a table?
No. of Recommendations: 1
Roughly $8 per share for the year going forward? This would be a forward PE of 17 at $137 per share.
No. of Recommendations: 1
i beat you both but only bought 10 pct of my position. 130.11
i tend to move slow and will likely add in the coming weeks and months if nothing else takes my fancy
No. of Recommendations: 2
Based on 8$ per share earnings, 8% growth over the next 5 years from that base and an end multiple of 18 with a desired return of 15% pa for my trouble this equates to an entry price of $104.
No. of Recommendations: 0
Added as well, now running into my position limit so I'm probably done buying.
The results were weaker than I had expected but still think it's a cyclical issue
and the business model is fine. May take a couple of quarters until we see the light.
No. of Recommendations: 0
' No scan, no checkout, technology is the solution' btw, what is the average price of an item at the AMZN store? Is this technology cost effective on 1.25 $$ items?
No. of Recommendations: 0
<' No scan, no checkout, technology is the solution' btw, what is the average price of an item at the AMZN store? Is this technology cost effective on 1.25 $$ items?>
I rewatch the video just to spot prices. Most items are from $1.29 to $3, the highest is lunch box about $10.
No. of Recommendations: 0
I picked up some more options, and am kicking myself a bit for purchasing options in the first place back in June.
1. Merchandise price (used to be $1, now maybe $5)
Are you maybe thinking Dollar Tree? Dollar General has always had $5 and $10 items since I first visited 23 or more years ago. I tried to find out when they added pricing greater than $1, but I only found this from Dollar General's history "In 1989, the majority of products in Dollar General stores are priced at $10 or less." That's 34 YEARS ago.
Is this technology cost effective on 1.25 $$ items?
You're definitely thinking of Dollar Tree - they recently increased their pricing from $1 to $1.25.
I rewatch the video just to spot prices. Most items are from $1.29 to $3, the highest is lunch box about $10.
You've got the idea. They also have an app you can download that shows pricing. Looks like they sometimes carry $20+ Lego sets, and $30 folding garden chairs.
No. of Recommendations: 1
"In the past week, several US companies including discount retailer Kohl's, Foot Locker, Dick's Sporting Goods, Home Depot, Walmart and Target have raised the issue of or fielded analysts' questions on shrink."
Y'know, last year when we walked into the local Walmart and saw that they had only 1 manned checkout open and 20+ self-scan checkouts, I said to wife "They are betting that the extra shoplifting will lose them less than they save on checkout persons salaries."
On the way out we watched a large lady with an overflowing cart scanning about every other item.
No. of Recommendations: 8
(do US stores require checkout assistants to stand all the time? that would be outrageous in europe).
We noticed two things about the stores when we were vacationing in Europe.
1) The checkout clerks were sitting down.
2) There were one-way gates at the entrances and exits. The smaller 7-11 type stores were set up so that the only way to leave was to go past the checkout--and the checkout lane was narrow and only one person wide.
No. of Recommendations: 0
All the domestic supermarkets in the UK are encouraging self scanning, some clothes stores too most notably Primark.
I was surprised to see it in Aldi and Lidl too as they were already run by a skeleton crew of staff.
This is driven both by a higher minimum wage and online deliveries where many staff are now picking from the shop floor, driving deliveries / manning collection stations.
No. of Recommendations: 1
I've been pondering the revenue/earnings shortfall without a seemingly complete explanation. I wonder if the stores are not open -- meaning some stores are not open all the hours they're supposed to be. I think about some of the fast food places that have been open limited hours or only open for drive through because they couldn't find sufficient employees. It seems fast food and DG would be drawing from a similar employee pool. Maybe the self-scanning tech is viewed not only as cost cutting, but also increasing store hours by requiring only one employee to be present?
I don't know if lack of employees is a substantial problem for DG, but I wish I had an answer one way or the other. I wish there was a metric like monthly-store-open-hours I could watch. Any thoughts on how this could be teased out? Something in payroll? A collection of webcams that show DG storefronts or parking lots? Something else?
No. of Recommendations: 1
'I increased my holdings by 23% in the premarket'
Also, 'Lowered my basis' :) on DG today @$129.50- the new shares represent 1/3 of all the total position and eager to add if it dips another 10-15%. Still Own the DG 1/25 100 Strike call options from June as well( down 43% on those) but plenty of sand left in that hourglass!
No. of Recommendations: 0
No. of Recommendations: 0
Apparently Americans are role models for the world. Shameful.
No. of Recommendations: 4
https://www.telegraph.co.uk/news/2023/09/02/tesco-...Or the British are....
It was Jack Cohen that invented the modern supermarket concept with Tesco.
I recently walked into another smaller Tasco convenience store and they had installed anti ram raid bars on the windows and the staff behind 2 checkouts were sealed into a floor to ceiling perspex box with small serving hatch (knife / bullet proof?!)
The full time security staff member who used to be there before the perspex box had disappeared... Perhaps it's too dangerous for him.
Welcome to modern Britain, the country has "gone to the dogs".
It was only a few months ago when I was having a sandwich in the park outside my clients office and 4 policemen came running out from behind a bush, tasered a man in a group / wrestled him, sat on him and apprehended a 12 inch machete from said individual and then marched him off to the police station.
Also while visiting a relative looked out of the window of their home and saw a drug deal / exchange take place outside in broad daylight.
Delightful.
No. of Recommendations: 0
No. of Recommendations: 0
Lester, is this a relatively new phenomenon in your area? Thank you.
No. of Recommendations: 4
No. of Recommendations: 2
No. of Recommendations: 20
Worth having a look at free cash flow vs EPS.
https://www.macrotrends.net/stocks/charts/DG/dolla... Bear in mind that the definition they are using of free cash flow is "operating cash flow minus capital expenditures".
As free cash flow is usually used as a proxy for money being generated, this definition implicitly assumes that the firm in question is doing no expansion capex: that it is all maintenance capex.
If you wanted to juice that number, just stop spending on expansion!
DG does a huge amount of expansion capex, so that definition gives a rather non-obvious view of things.
Have a glance at DG's cash flow statement. Last year their depreciation & amortization line is only 46% of their purchases of property and equipment.
Thus the crude estimate is that their expansion capex was 54% of all capex = $836m.
D&A was 53.4% of P&E capex in the first half.
Jim
No. of Recommendations: 0
Given that they've been expanding fast historically and have been maintaining an impressive and increasing increasing cash flow throughout why has it fallen off a cliff now?
No. of Recommendations: 0
Given that they've been expanding fast historically and have been maintaining an impressive and increasing increasing cash flow throughout why has it fallen off a cliff now?
Panic by holders?
Anyway.....I'm hoping for DG to get to 120, where I have a GTC buy order. Now watch, it'll take another 20 point drop and I'll _still_ be underwater at 120. ;)
No. of Recommendations: 6
"Given that they've been expanding fast historically and have been maintaining an impressive and increasing increasing cash flow throughout why has it fallen off a cliff now?"
In addition to general panic, mentioned by Rayvt, I'd suggest that the big money doesn't want to hold a stock that has two straight reductions in guidance (under a quite newish CEO, to boot), and has basically promised that any new signs of a turnaround in earnings trajectory are unlikely to materialize until 2024.
I like the stock as a 3-5 year hold, but I suspect the big money traders are speculating that we don't see a significant turnaround in price until management calms the waters and builds confidence in its ability to return to profit growth. And that won't happen without confidence-inspiring quarterly reporting.
That said, at some point it gets too cheap too ignore the possibility of a bounce. I haven't done the calculations, but I assume we're safely at 5 year lows after the inflation adjustment. At that time (5 years back until COVID), the stock was earning about $6-6.75 a share.
