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https://www.cnbc.com/2023/10/12/dollar-general-sto...

Dollar General's
former CEO Todd Vasos is coming out of retirement to helm the company, which aims to rebound from slowing growth and allegations of unsafe working conditions.

Vasos, who served as the discounter's CEO between June 2015 to November 2022, will replace Jeff Owen effective immediately, the company announced on Thursday.

Stock is up roughly 6% on the news...

tecmo
...

Updated guidance is also available:

https://newscenter.dollargeneral.com/news/dollar-g...

At 2Q, the firm had guided very broadly, with the update narrowing expectations to the low end. So the pop is in spite of the negative news / revisions downwards on SSS and earnings. Probably also a case of the Board getting in front of another case of Owens overpromising and underdelivering, as bleak as the 2Q report had been.

Nice! We all seem to like the move on paper and Todd seems well liked and well decorated. Wonder how long it will take him to navigate DG out of this 6 month tailspin with its many challenges and the current macro- would imagine at least 6-12 months? Working on my 'patience is a virtue' trait!

This feels vaguely reminiscent of Starbucks bringing Howard Schultz back years ago. But in that case it was after nearly a decade in retirement.

I guess a big question is how much of DGs problems are execution related vs Macro headwinds

If today's low of 101 and change marks a bottom I will kick myself for not getting the opportunity to add a lot more at 100/sh.
Although the shares are up 8% in the aftermakret session, I wouldnt be suprised if we drifted back down over the coming days, especially if we get a resumption of volatility in equity markets.

I try to be simplistic and focus on the downside when I position on falling knives. "The rest takes care of themselves."

I suppose if it's just macro headwind it won't affect the stock trajectory in the long term so it could be a nice buying opportunity. If it is execution related there is a better chance of getting fixed with a seasoned and tested CEO. DG couldn't have been run to the ground over such a short time.

I have been trying to hypothesize there were structural shifts but couldn't come up with any credible angle. Temu and Amazon was occasionally mentioned but it's far fetch. What other structural changes are there that could have eroded DG's moat (or whatever they believe to be their moat) so badly? Gradual but permanent cultural shift in consumer behavior in rural U.S.? What am I missing?

Side question: nothing big, but DLTR was also up 1%+ after market? Pure empathetic reaction?

I have worked on Wall Street for 35 years, talking with the largest pools of managed $, and NOBODY will touch DG at ANY PRICE today.

#Sentiment

DG Piper Sandler lowered the firm's price target on Dollar General to $114 from $144 and keeps a Neutral rating on the
shares. The return of Todd Vasos as CEO is good news for Dollar General, but not a quick fix for a company that
appears to be facing numerous headwinds and issues, the analyst tells investors in a research note. Dollar General's
issues appear fixable, and Vasos' leadership should inspire confidence in both employees and investors, but a
meaningful turnaround will likely require more investment in labor and a reassessment of growth initiatives, the firm
contends

DG Barclays analyst Seth Sigman lowered the firm's price target on Dollar General to $124 from $128 and keeps an
Equal Weight rating on the shares. The management change "offers new glimmers of hope after a messy run, but is
also concerning as it implies so much has changed in such a short period of time," the analyst tells investors in a
research note. The firm likes Dollar General's sense of urgency but is still not as sure on the path forward, including
steps to improve execution, and where earnings settles.

DG BofA lowered the firm's price target on Dollar General to $100 from $105 and keeps an Underperform rating on the
shares after the company announced that Todd Vasos will replace Jeff Owen as CEO, effectively immediately, to as
Chairman of the Board Michael Calbert said "restore stability and confidence in the company moving forward." Dollar
General also lowered the midpoint of its FY24 guidance, notes the analyst, who lowered the firm's FY24 EPS estimate
to $7.60 from $8.00 following the update, driven by a reduction to the sales and margin outlook

DG (Dollar General Corporation): Vasos Reinstated as CEO; Sounds Good on the Surface, but Caution Warranted; Remain Sidelined (EW; PT: $110): DG surprisingly announced the reinstatement of Todd Vasos as CEO. While we are pleased to see change, DG's issues run deeper than Owens, it's still unclear if action will be aggressive enough, and the ultimate fix seems costly. We remain EW and reduce PT to $110 (from $145). The board's decision to replace Jeff Owens with former CEO Todd Vasos is likely to be well-received by investors. Vasos is highly regarded and has a history of success at DG. But we recommend some caution. Vasos only retired last November, served as an adviser through March 2023, and never left the board. This move makes perfect sense on the surface, but we should acknowledge that DG's issues were festering before Owens took the CEO role. DG's stock is likely to react positively given the respect for Vasos and recent poor performance. That said, we believe DG's value should be permanently impaired by structurally lower margins, increased competition, and slower store growth. (Ed Kelly)

When the share price reacted so strongly after the announced change of the CEO, it occurred to me that Dollar General's business model might not be as good as I thought.

As Buffett said, "I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will."

While you guys may snear at the comparison, some amount of thinking outside of stated eps and a takeoff of massive historical comparisons may be relevant. A comparison is the years of complaints old stupid dealraker made while holding his inheritance of Norfolk Southern.

Yep, the recent years of Hunter Harrison worship and model blead eps out to a degree that made an endless number of followers chanted upwards to the right of eps now and forevermore. Little attention was paid to the simple fact that absolutely nothing the company was doing was sustainable.

I complained, all others chanted in unison: "Hunter's model rules all." Cap ex plummeted; employees suffered in pay, benefits, and number of routes ended; maintenance ended while recently opened rail yards were closed; massive buybacks of stock at ever incrasing prices were admired by all comers.

And interestingly...wow...all reversed. I knew to sell, but given the stock has been in the family now for over 83 years (I got a whopping 1/27th of granny's stock)...but at $300 per share the stock was a joke for valuation and the business model literally sucked. Pefectly obvious to anyone with thinking skills above just following eps numbers and growth of that figure...a meaningless figure as to intrinsic value.

DG? Run way below sustainable levels of operation. Too many stores slung up in too competitive of locations with too few employees. That's the beginning, but now the entire overall economic world is evolving as to costs, interest rates, and inflation. Where I live the local store is the joke of the Facebook page; there are 20 stores within 27 miles of my home on the large lake here and all of them are within 7 miles of WalMarts.

Like Norfolk DG is on the re-set mode. Ain't it awful. Starting over from a new footprint is the reality. More staffing, more competition, less favorable economic world.

A tad of right brain enters the picture. Long ago I debated for months with manlobbi on BPY, his 7 X IV in 10 years was the online belief and it was held by all in unison. I considered BPY back then worth 1/2 the selling price so manlobbi's value was multiples of mine. Today? Brookfield Property is worth zero in my view. You say I'm bonkers? I believe it was Sam Zell who said, "You guys call me a billionaire yet there are many times in the past when I didn't know if I could put supper on the table."

Think clearly people. Using stats and doing massive, and I mean MASSSIVE, historical presentations is not something that often results in the alpha you desire. There are things in your face staring at you if you are willing to look past the nose.

The customer of the dollar store is often the very person most of us want to starve to death by cutting monthly benefits. The slow liquer cycle (those DUI's) driven to the store is the thing we try to run over with our SUV as we dominate the road. And we expect to bleed out some profits long term.

Years of short term bounces are coming. What's the long term story of DG? Really? The outcome isn't know for years and basically not a one here will be here when that comes.

But old stupid dealraker suggests any competitve edge DG has or had ain't gunna sustain...

But the short term pops, that generally what the short term online forums are all about. After all we basically turned the Berkshire board into day trading based on book value. Day trading Berkshire while being 50% cash and dissing the S and P is one hell of a long term investment strategy, but it has been that way now for all of my 27 years of being on the forums.

Life is great...if you can stand it.

One thing that struck me in Bloomstran's interview last month, and that had made the rounds here, was that he praised DG management, but then proceeded to refer specifically to the Board ("it is so good"), including Chairman Mike Calbert, without praising or even mentioning then CEO Owens.

[i]

[01:14:15] Chris Bloomstran: But I'm making, I've just made Dollar General a very big position here in the last month and a half, because it's now among the cheapest companies in the portfolio versus what was one of the most fully valued companies in the portfolio two years ago. Under the hood, you don't necessarily see it if you simply look at a list of Semper Augustus holdings, but it's the value that's added by trimming the deer and buying the cheap at the margin that I think delivers an enormous amount of value over time.

[01:14:43] Chris Bloomstran: And that's. very much predicated on price. I mean, this has nothing to do with, and I believe the issues that Dollar General is grappling with now operationally and on the regulatory front and on a little bit of changing distribution as they've changed the footprint of the stores and they're making their base store model.

[01:15:00] Chris Bloomstran: A thousand square foot bigger, 1, 100 square foot bigger than the typical 7, 400. [b] I think this management team is so good. Their board is so good. Mike Calbert, the chairman, I've got to know, he's phenomenal. These are very good retailers. They'll fix the current issues. [/b] And again, some of these issues are simply the flip side of the business being pulled forward, being too good for a year and a half period of time.

[/i]

Transcript available here: https://www.theinvestorspodcast.com/richer-wiser-h...

Calbert bio available here: https://investor.dollargeneral.com/websites/dollar...

Make of it what you will, I guess. But I suspect that emphasis wasn't accidental.

The negative here, of course, is that some combination of the Board & Vasos signed off on Owens as CEO, and they would have known him well (as former COO). So if Owen wasn't the answer, it's unclear why they didn't know it in November '22.

Dealraker - why the need to structure your posts as a story of how everyone was against you, no one listened, but then I was right, so you should listen to me (actually, I don't care if you listen to me, I don't you, but you should listen to me anyway)?

I've read your posts for years. I like the content and have a lot of respect for your analytical thinking. But I think you do yourself a disservice when you position yourself as a victim of persecution.

An alternative point of view:
* I don't know the CEOs and their skillsets. How would I? You would need some real life direct experience working with them to really have a point of view. Terrible CEOs can look great in a good environment, working in a good business. Great CEOs can be overwhelmed by forces that a company does not have the positioning or resources to withstand. CEOs often look like heroes and goats as much by circumstance as by skill. You have to have a good sense of someone holistically over a long period to judge them well (although maybe you can judge terrible CEOs much more quickly).
* The market reaction isn't a great way to discern. Markets like to see change when things are going poorly, and I don't totally disagree. Sometimes change itself is helpful, even if the capabilities of the new are the same as the old because baggage can be limiting.
* My guess is that the new CEO didn't run the business into the ground. We are in a pretty unique environment with the pace of change on inflation directly affecting their customer base, labor costs showing no signs of abating at the low end of the pool, some impact from elevated shrink, and competitive forces that have come on strongly in a very short period of time. All of this kind of came together into retail aggressively (a lalapolooza event) in the last 9 months. Even the old CEO would probably have been challenged to adjust to such an amplified wave striking in such a short time.
* Maybe the old CEO saw the forces amassing and was happy to retire while things were still good, hoping someone else could carry on through the challenge and he could escape the bows and arrows that he knows are inevitable from armchair analysts. Any maybe the new CEO didn't appreciate how disruptive this period was going to be to hold stability.
* But if you think that the forces affecting you are manageable once you get through the period of fast change. If inflation stabilizes at whatever level so it becomes normal, if shrink starts to come down a bit, if Temu's incredibly fast adoption slows, and if labor inflation starts to moderate, the business model might start to deliver as it has in the past. And as the returning CEO, you get the opportunity to benefit by coming in while things are bad and retiring again once things are good. I would say you are a pretty smart CEO, able to read the tea leaves, and know what's necessary to continue to deliver in a way external judges are able to appreciate. Maybe that is the insight that makes the old CEO a more skilled person than the new CEO who wasn't able to discern what was ahead.

DealRaker is the man. Calls out all the hero worshiping of the perceived sharpies.

Hey Deal,
If DG turns out to be a satisfactory investment will you offer Jim an apology?
All the best!

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