7 Best Department Store and Discount Retailer Stocks to Buy

5. Dollar General Corp (NYSE:DG)

Number of Hedge Fund Holders: 42

Dollar General Corp (NYSE:DG) is a Tennessee-based chain of discount stores that operates more than 20,000 stores across the country and Mexico. In February, it celebrated the grand opening of its 20,000th store in Alice, Texas, and is continuing its rural expansion across the country. Dollar General (NYSE:DG) offers discounted deals and slashed prices on a wide array of offerings in its stores, including clothing, kitchenware, grocery items, pharmaceuticals, health supplies, outdoor furniture, and much more.

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 as compared to six months ago. However, with inflation slowing down, the company is expected to make a recovery.

Around 60% of Dollar General’s (NYSE:DG) customers hail from a household income of less than $35,000 a year, for whom the company offers numerous deals and discounts. At the beginning of the summer, it offered 100+ back-to-school supplies below $1, with an additional 30% discount for educators. Discounts like these give the company a competitive advantage, especially when compared to its competitors who do not hold such every day low-price positions.

The company is now focusing on controlling what it can control, including customer-centric merchandising, a timely and accurate supply chain, and in-store execution. Furthermore, Dollar General (NYSE:DG) is 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 an increased level of engagement to customers. It is also focusing labor hours on perpetual inventory management in an attempt to facilitate its sales growth and improve in-stock levels.

Dollar General (NYSE:DG) is currently trading at a forward P/E of 14.23 at a 21% discount to its sector. 42 hedge funds hold stakes in the stock as of Q2 2024.