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No. of Recommendations: 4
Andrew Bary of Barron's wrote his thoughts on DG Jan 31.
https://www.barrons.com/articles/buy-dollar-genera...For those pay-walled...covers basics but not much beyond what anyone can see:
"“Very little has to go right for sentiment to improve,” says John Rogers, a senior research analyst at Pzena Investment Management. “It’s a good business in a clearly defined niche.”
Dollar General’s turnaround starts from an enviable position. The company has an entrenched position as the general grocer to rural America. With more than 20,000 stores—including 1,800 in Texas alone and about 1,000 in seven other states, including Florida—it has the largest store footprint of any retailer. About 80% serve communities of fewer than 20,000 people."
A while back I jumped in with confidence, however too early in the falling-knife decline. My gut instinct was 'something larger going on here' as the DG story clearly changed fast. A rougher stretch was ahead than I first concluded. Bailed within 6 weeks with only mild injury. Glad I did.
I still like the company for its simplicity, the geographic moat they have built and competitive pricing power. I'm revisiting...
If theft can be controlled, stores mildly modernized/efficient and their preferred customer accessibility/availability over online & big-box remains with 'reasonable' comparative pricing what's not to like? Kinda proven model, assuming location improvements aren't stupid expensive.
Best news its meaningfully cheaper than mid '23 and pays a nice divvy for those that like that.
Despite the rough patch...it's still an earner. Bottom line for me.
Would appreciate arguments.
Cheers,
m
No. of Recommendations: 5
mdtis, I've written this ad nauseam and had absolutely zero responses now for several years and expect to get none in the future. DG is building a slew of stores most simply DG but others with something like a "mart" or whatever additional name and most are within a very small - increasingly small - distance from Walmart. This is true all over the US. In my county there are 27 DG's and all but 3 are within 5.5 miles of a Walmart.
The "stand alone" in a rural community idea sells like hotcakes. The business of building close to Walmart is a more accurate story.
It is a story of store density, not stand alone. Is this going to work?
I have no issue whatsoever in buying DG stock. But I'd love to have an accurate discussion online about this. 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!
No. of Recommendations: 9
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
No. of Recommendations: 1
A lot of your complaint is based upon where DG's are located. Do you have more info beyond your country? There's quite a bit of variance on density state to state and county to county, from what I've gathered.
One thing I've done is taken a look at proximity of DGs (or DG Markets) to Walmarts (or FDO), plus taken a look at traffic and how it relates to distance from a Wal-Mart, via various random samples, using:
https://analytics.placer.ai/My findings are too ad hoc to report out, but throw me a state and suggested area and I'll try to come up with something intelligible if I find the time.
FWIW, I do think your right that one DG strategy for denser areas has been to go the DG Market route, which draw more (low margin, food heavy) traffic than regular DGs, especially when Wal-Mart has a closeby location. But my rough data also suggests the 3/27 is probably an outlier county, and is on the poor end of DGs/DGx/DGMarket etc staying away from Wal-Mart.
No. of Recommendations: 0
My wife and I travel at least a few days of every month. Last month we went to Southport NC and checked the DG locations while there. Not many in the Southport area but all three were in the commercial area and all within a short distance of Walmart stores. All three also flanked by other similar stores.
There are stand alone in the rural community stores in lesser densely populated counties (not countries, we are dealing with counties here not countries). But the new store growth is largely not that, it is more of the dense model.
No. of Recommendations: 0
Also using the word complaint to me implies bias. There are about 500 posts here and on the COBF DG forums complaining about my posts, all slamming me as out of touch and negative. Those people have disappeared......right when they should be stepping up to interact and think. Most of them lost money, added to lose more money, the added more only to sell at what may be the worst possible time. They are gone right when they should be present.
I'm not complaining, but 100 points higher people were overwhelming the forum with data about stuff that was absolutely meaningless as to whether DG was or was not a good business to buy the stock of.
It is time to think, think, think. DG offers what is possibly a good return in a world of likely bad outcomes.
No. of Recommendations: 0
I’m a lawyer by trade, where a “complaint” has a different connotation. Used it out of habit, the above was not my intended meaning. I’m just asking for data.
No. of Recommendations: 1
I think I am going to buy DG again. I'd bought a tad in the 70's but briefly discussed it here and other places, then sold.
It isn't typical for me to ask for others to help me conceptualize something, but DG is well outside my comfort zone. Yet it seems that with maybe the lessening of out-of-the-US competition we may see some positives develop.
No. of Recommendations: 6
<< It isn't typical for me to ask for others to help me conceptualize something, but DG is well outside my comfort zone. Yet it seems that with maybe the lessening of out-of-the-US competition we may see some positives develop. >>
Hi dealraker.
Before I sold it, my business had offices in Tennessee and rural
Alabama. From my perspective, it didn't appear to matter how
close a Dollar General was located to a Wal-Mart, sometimes
within sight of each other, and yet there would appear be a
steady flow of traffic going through DG.
Maybe someone just wants some potato chips and a Mountain Dew,
so they just think it's more convenient to stop at DG than
to spend the time at Wal-Mart Superstore. I dunno.
In the rural areas I would find myself often popping into a DG
store for one or two items. The folks I observed shopping
in these places didn't appear to be the demographic that were
likely to buy their paper towels online.
Often the customers and employees would know each other and
exchange banter. So maybe there's a social dimension which
maintains repeat business. Most of my employees and their
families would shop at both Wal-Mart and DG. A typical office
exchange:
"Hey, I'm going to stop by Dollar General. You guys need anything?"
-Rubic
Disclaimer: I no longer live in the US, so have no I idea what the
current situation is. It's been a few years since I shopped at either
a Dollar General or a Wal-Mart.
No. of Recommendations: 0
Rubic, what you write is accurate and obvious. Where I'm trying to gain is the pressure on those economically challenged and the behavior of this group as to going to DG vs some other product provider. Is there change is process and if so what is that change? Ever so slight change makes for huge outcome.
