7. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 49
Dollar General Corporation (NYSE:DG) was spotted in the 13F holdings of 49 hedge funds in the first quarter, with a total stake value of $1.6 billion.
Dollar General Corporation (NYSE:DG) is a consumer staples merchandise retail company based in Goodlettsville, Tennessee. The company offers consumable products, such as paper and cleaning products, paper towels, bath tissues, and storage bags. It also offers home products such as kitchen supplies, appliances, and much more.
Dollar General Corporation (NYSE:DG) has been working to expand its product offerings to include fresh produce such as fruits and vegetables. The company’s private brand, Clover Valley, is operating on this front. Dollar General Corporation (NYSE:DG) is also currently benefitting from weaker competition in the market, especially with Dollar Tree heading towards the closure of several of its locations, while Dollar General Corporation (NYSE:DG) is planning on opening up at least 800 new stores in 2024.
As of June 28, the average analyst price target on Dollar General Corporation (NYSE:DG) is $149.3, with a high forecast of $170. Telsey Advisory Group analysts also maintained an Outperform rating on the stock on May 31.
This is what Artisan Partners said about Dollar General Corporation (NYSE:DG) in its fourth-quarter 2023 investor letter:
“Our biggest full-year detractors included energy holdings Schlumberger and EOG and 2023 purchases Baxter International and Dollar General Corporation (NYSE:DG). Dollar General, a discount retail chain in the US, has dealt with a few struggles. The retailer had previously benefited from COVID stimulus checks, reflected in the bump it experienced in revenues and margins. However, the effects have worn off, and its core consumer has been hurt by inflation, stiffer economic conditions, lower tax refunds and reduced SNAP benefits. Margins are also under pressure due to labor costs, shrink and markdowns. Some of the issues are likely self-inflicted. After years of focusing on store growth to drive the top line, store standards have suffered. Addressing store standards is needed to turn around flagging traffic, comps and customer satisfaction. On the positive side, discount retail due to its trade-down feature tends to be a defensive business during economic slowdowns. Dollar General has a strong market position and faces less competition than other discounters due to its largely rural footprint. The business’s value proposition is everyday low prices, a convenient format and proximity. The company has leverage due to capital expenditures, but interest coverage of ~9X is strong. From a valuation perspective, the froth from the pandemic, when it traded in the low- to mid-twenties, is gone. So, we aren’t paying for margin upside or store growth. Those would be bonuses. If the company can continue to grow revenues, generate cash flow and buy back stock, we still see a path to success.”
