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Up 8.

NOBODY ON WALL STREET WILL TOUCH DG AT ANY PRICE. FACT.

"" NOBODY ON WALL STREET WILL TOUCH DG AT ANY PRICE. FACT."" Good morning Cranky, because of you, I no longer feel a need to attend comedy shows. When a stock is up 7 $$, that tends to indicate more buyers than sellers, no? As always, thanks for your sage advice!

Not advice

Observation

I can send you 5 Wall Street notes this AM telling you how bad it is at DG if you want

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 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 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 (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)

Cranky, are you trying to convince us to go, all in DG ? What does Cramer think? Thank you.

M*IV north of $170

Wonder Boy Mungo drove it over the cliff

Wall Street despises

Short covering

Bloomstran adding

DG BofA lowered the firm's price target on Dollar General to $100 from $105...
DG Barclays analyst Seth Sigman lowered the firm's price target on Dollar General to $124 from $128...
DG Piper Sandler lowered the firm's price target on Dollar General to $114 from $144...
reduce PT to $110 (from $145)...

FWIW, my own price target for DG remains unchanged, $200-220ish.
I'm not sure how long it will take--1 to 3 years??? Hard to say. But I expect it will be soon enough to offer a good rate of return with high safety.

Most of the drumbeat of bearishness is either just noise, or just cyclical stuff with a recession probably coming.
Maybe not all of it: If US society breaks down to the point that a lightly staffed shop will get robbed while the clerk says "Sure, whatever", or small town poverty levels get much more dire, then there may be problems. Otherwise, the business model seems entirely intact to me so it's just a matter of waiting. They make a lot of money, a situation usually ends well.

Jim

As long as we're throwing around reports: As reports go, I found this Oct 13 Deutsche Bank note, based on a call with a former VP, more helpful than most:


Darkest Before Dawn; DG Expert Call Key Takes
Yesterday, we hosted an expert call with a former DG Division Vice President (oversaw 2,500 stores in seven states) to dig into key topics including recent operational challenges, shrink, competition, and store growth. While we acknowledge near-term volatility, we maintain our long-term positive bias toward the name.

Our expert reinforced our overall constructive view of the long-term potential at both DG and the dollar store channel, noting that unit growth goals are reasonable and the initiatives in place are solid. While he acknowledged short-term headwinds, the most pressing being the need for additional investment to improve store standards across the chain, he sees nothing broken structurally at DG in the longterm. Our expert highlighted that adding more field leadership would have more impact in improving the business. Although we are still concerned that operating margins may remain constrained in the short- to medium-term, we see DG returning to its previous growth algorithm with improvements in labor and store operations. We reiterate our Buy rating but recognize that patience will be needed.

Key takes from our call include: 1) more investment is likely needed to improve existing stores; 2) unit growth plans remain achievable with the right level of operational support; 3) top-line growth is possible with improved in-stock levels and customer service; 4) competition is most acute from FDO, as it implements elements from the DG playbook to gain share; and 5) current DC plans may not be enough to support planned unit growth.

What Drove Current Challenges...
Our expert, who left DG in early 2023 after six years with the company, sees the current challenges stemming from changes in the scope of responsibilities for field management starting in February of 2022. District managers saw increasing breadth of coverage and job complexity (more initiatives to implement including DG Fresh, NCI, BOPIS), with store responsibility increasing from 15-17 stores up to 25- 27 stores without a corresponding increase in resources. In addition, a heightened (and strict) focus on improving store standards without providing additional resources damaged employee morale and led to higher levels of turnover. This left the company without critical institutional knowledge, specifically in key store management and field leadership roles. As a result, prioritization of important, urgent, and critical tasks fell short.

Keeping Competition Under Control
Competition has grown increasingly strong for retailers as consumers become more value-oriented and price conscious. While DG has lost share recently to peers, our expert does not see a long-term effect on the company. He sees the greatest risk coming from FDO, which has made some of the biggest changes in store conditions, such as improving the shopping experience and raising gondola heights (we note, Rick Dreiling implemented the same changes at DG a decade ago). WMT, on the other hand, has invested in price, private label assortment, Walmart+, and more. While our expert is of the view that newness from such programs may have a short-term impact on shopping patterns, he believes shopping habits of DG's core customers (those who shop on a weekly basis) will be largely unchanged, highlighting they generally shop at WMT only ~once a month. Our expert highlighted that while there may be some impact from e-commerce sites like Temu, it is not likely to be drastic. Dollar stores attract a specific customer with a fixed budget, and this customer has a largely need-based shopping list. Although dollar stores may feel near-term pain, our expert believes the initial excitement will taper and more customers will return to normal shopping patterns.

Getting the Top-Line Back on Track
DG's top-line has fallen below historical ranges in the post-pandemic period, as market share shifted toward competitors. Our expert noted 1) DG can gain share back from WMT; and 2) both DG and FDO can grow within the dollar store segment. Recent headwinds from turnover and cultural changes have impacted store standards potentially leaving sales on the table. Part of the effort in regaining share and rebuilding top-line, our expert highlighted, will come from a renewed emphasis on the customer experience and service. DG's core, rural customer prefers a "local" store feel as opposed to a "corporate" feel. Further, our expert noted the company should focus on driving the value message while increasing basket size through multi-unit pricing. We believe that as labor investments work through the system, workload will reduce, and employees will have more time to interact with customers.

How Many Labor Hours Are Needed
A lot of debate has taken place around the level of investment needed for labor hours. After initially investing $100M (by our calculation, this translates to seven additional hours per store per week), management upped its level to $150M. Our expert highlighted the current amount is enough to bring stores that perform well back to the historical DG standard. Alternatively, he is unsure if the investment is enough for underperforming stores. For example, stores that are behind on freight/ delivery and having trouble managing rolltainers, will potentially need more investment to catch up with operational standards. Further, as there is increased demand for consumables, additional labor hours will be needed to make the stocking process more efficient, in addition to the expansion of DG Fresh. In our view, additional investment will likely be needed above the $150M in order to ease workload stress, boost morale and get underperforming stores back on the right track.

Runway for Unit Growth
Our expert noted considerable white space remains to add new units and does not feel DG needs to slow its growth plans. While it is more expensive to open and maintain stores, internal investment for new stores is good and the returns are "great". Additionally, DG has a strong real estate team and is going after the right sites to make these stores successful. Thus, 1,000 stores seems reasonable, according to our expert, however, management needs to ensure they are supporting associate growth, developing the people and the culture with the same care and attention as the new units. All in, our expert sees unit growth remaining a key contributor to EBITDA, noting if DG is not opening new stores another retailer will, collecting that market share along the way. While unit growth can remain the same, our expert noted a need for additional DC support. The current DC build plan implies 1,000 stores per DC, however, considering the scope and complexity of the initiatives DG has in place, the 760 store per DC may be better to adequately support the store base. Lastly, our expert is positive on the company's move into Mexico, noting the right leadership is in place, but sees additional near-term expansion unlikely as DG focuses on its current geographies.

Looking Forward...
DG has been a consistent compounder over time. Although it's running into operational challenges, our expert noted, and we agree, that these issues are not structural. Employees are challenged with: 1) elevated workloads due to lack of labor hours, 2) less competitive wages relative to peers; and 3) compliance culture which creates a distraction from day-to-day activities. Internal changes are necessary, specifically retaining field level employees and improving morale of store managers and hourly workers. The company can continue to grow units, but also needs to focus on employee development. Our expert noted the labor market has started to loosen and as the company looks to invest in labor hours, it needs to get back to being the employer of choice in small towns. In our view, as labor challenges abate, operational stresses should improve, leading to a better shopping experience and ultimately boosting the top-line.

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Not every day that you get this level of insight from an executive in the company. Very helpful, and reassuring too. Thanks for sharing, Lear

Yeah, I know, everybody is sick of DG.

I just thought I'd mention that the drumbeat of underperformance had turned into (so far) a strong trend of outperformance.
Since the "back to the old boss" story that kicked off this thread, the stock price has been steadily outperforming the average S&P 500 stock.

Using RSP as a proxy for "the average big US stock" and using the average price in the days before the announcement, Oct 9-12 as the baseline, DG is up +18.1% and RSP is down -3.8%.

About half of the gap was right after the announcement, and the rest has been a steady relative climb.

One can speculate that, for those who didn't want to catch a falling knife but believed in the story, it's now safe[r] to go in the water. Mr Market is no longer dumping, and DG is now a relative-to-market momentum stock.
DG at $122.22 as I type. My breakeven is waaaaay above that. RSP at $136.03.

Jim

I'm not much of a technical analyst guy, but I do follow some of the basic signals.

DG is coming up against its 50 day MA, it will be a good test as the 50 has been its ceiling for awhile now.

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