Why Dollar General Stock Is Headed Toward Its Worst Day Ever

Outside of a Dollar General store in Kingston, New York

(Image credit: Angus Mordant/Bloomberg via Getty Images)

Dollar General (DG) stock is headed toward its worst day ever, down nearly 30% at last check in Thursday's session. The selloff comes after the dollar-store chain missed top- and bottom-line expectations for its second quarter and slashed its full-year outlook.

In the quarter ended August 2, Dollar General said its revenue increased 4.2% year-over-year to $10.2 billion, driven by same-store sales growth of 0.5%. Its earnings per share (EPS), meanwhile, slumped 20.2% from the year-ago period to $1.70.

"We made important progress on our Back to Basics plan in the second quarter," said Dollar General CEO Todd Vasos in a statement. "However, despite advancing several of our operational goals and driving positive traffic growth, we are not satisfied with our financial results, including top-line results below our expectations for the quarter."

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The results also fell short of analysts' expectations. Wall Street was anticipating revenue of $10.4 billion and earnings of $1.79 per share, according to Yahoo Finance.

As a result of its weak performance in the first half of the year, Dollar General cut its full-year outlook. It now anticipates revenue growth in the range of 4.7% to 5.3% and earnings per share to arrive between $5.50 to $6.20. The company had previously forecast revenue growth of 6% to 6.7% and EPS of $6.80 to $7.55.

"While we believe the softer sales trends are partially attributable to a core customer who feels financially constrained, we know the importance of controlling what we can control," Vasos said. "With the evolving retail and consumer landscape in mind, we are taking decisive action to further enhance our value and convenience offering, as well as the in-store experience for our associates and customers."

Is Dollar General stock a buy, sell or hold?

It's been a tough year for Dollar General, with shares now down more than 35% for the year to date. However, Wall Street has remained bullish on the consumer staples stock.

According to S&P Global Market Intelligence, the average analyst target price for DG stock is $143.21, representing implied upside of roughly 60% to current levels. Additionally, the consensus recommendation is a Buy. However, analysts may very well revise their ratings and price targets lower following the earnings release.

Financial services firm Oppenhimer has a Market Perform rating (equivalent to a Hold) on DG stock.

"We look very favorably upon CEO Vasos' turnaround efforts to date, including a 'back-to-basics' strategy focusing efforts on the labor, supply chain, merchandising, and shrink prevention fronts," Oppenheimer analyst Rupesh Parikh said in an August 26 note. "However, we believe some of the near-term macro headwinds will likely continue to mask underlying improvements at the chain for the balance of fiscal 2024."

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.