No. of Recommendations: 3
Jeff wrote: I'm unsure ... 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 agree with your thoughts, Jeff. May I ask, is this the Jeff who is Wendy's brother, from the Fool boards?
I personally find myself surprised on a regular basis by a Dollar General located in a very out-of-the-way place in rural Western North Carolina, in places where I find it kinda hard to believe there is much if any profit supplying the population around it, but I do suppose the population is growing, so the store sales will too, if not particularly rapidly.
Given this saturation of DG stores even out in rural locations, and the sheer volume of stores out there that you note above, it's not hard for me to imagine they are transitioning to a much lower-growth phase of their corporate existence, and I'm sure that thought is a large part of what's fueling the market sell-off.
Seems like it's a good buy, but I sure don't expect long term growth like they've shown in the past.
More from Jeff: 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.
I also agree with this. CarMax has just opened their first location in my area, the urban center of Western NC with a metro area population of ~470,000 and fairly rapid growth prospects. I expect them to do well here, and if their growth opportunity in my city is similar to what is available out there for them around the US, then they have a long runway.
