10 Cheap Retail Stocks to Buy According to Analysts

7. Dollar General Corporation (NYSE:DG)

Forward P/E: 14.83

Analyst Upside Potential as of September 23, 2024: 12.08%

Number of Hedge Fund Holders as of Q4 2024: 42

Dollar General (NYSE:DG) is a discount store retailer with more than 2,000 stores across Mexico and the US. It offers an array of merchandise in its stores, including home products, consumable items, seasonal items, and apparel. Its offerings include brands from manufacturers along with its private brand selections at discounted prices. Dollar General (NYSE:DG) is continuing the rural expansion of its operations, opening its 20,000th store in February.

The stock fell after it reported its earnings for the second quarter. Its revenue grew by 4% year-over-year to $10.2 billion, but earnings per share fell by 20% to $1.70, below analyst estimates of $1.79. However, Dollar General Corp (NYSE:DG) is here to stay. The company announced that its primary base of consumers were lower-income shoppers, and factors such as rising unemployment, inflation, and interest rates had put them in a worse position than they were six months ago. However, with inflation slowing down, the company is expected to recover.

Dollar General (NYSE:DG) holds a competitive advantage due to its highly discounted deals and prices, especially compared to its competitors, who do not hold such everyday low-price positions. It is continually strengthening its operations by focusing on a timely and accurate supply chain, customer-centric marketing, and in-store execution. It is also working towards its “back-to-basics” progress, enhancing customer experience by increasing employee presence at the front end of its stores and ensuring that its associates provide increased engagement to customers. In addition, the company is working to boost sales growth and improve in-stock levels by focusing labor hours on perpetual inventory management.

It is also closing the less efficient temporary facilities and has opened two new permanent distribution centers in Colorado and Arkansas. These centers are expected to reach the top of their speed in the coming months, significantly contributing to reduced transportation expenses and a reduction in stem miles. Dollar General is also undertaking the first full-scale refresh of its sorting process within its distribution centers. This will allow its store teams to manage shelves more efficiently, stock them quickly, and ensure greater on-shelf availability. All of this is ultimately expected to support ongoing sales growth and boost profitability.