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Evercore ISI cuts Dollar General's shares, weighs competitive pressures

EditorEmilio Ghigini
Published 2024-03-15, 06:08 a/m
Updated 2024-03-15, 06:08 a/m
© Reuters.

On Friday, Evercore ISI adjusted its price target for Dollar General (NYSE:DG) shares, reducing it to $158 from the previous $165, while keeping an In Line rating on the stock.

This adjustment comes as the firm acknowledges the company's recent positive developments in customer traffic and comparable store sales but also notes challenges that may affect the company's EBIT margin recovery.

Dollar General has recently experienced a 4% increase in customer traffic, which is seen as a positive shift for the company. Despite this uptick in traffic, Evercore ISI points out that there are ongoing issues, such as product shrinkage and a competitive mix, which are expected to persist.

The firm also highlights the competitive pressures Dollar General faces from rivals such as Dollar Tree (NASDAQ:DLTR), Walmart (NYSE:WMT), and others, suggesting that these factors will likely result in a slower recovery for Dollar General's EBIT margins.

In comparison, Evercore ISI expresses a preference for other companies in the retail sector. Specifically, the firm favors Kroger (NYSE:KR), which is noted for its share stabilization and trades at 12 times EPS. Additionally, Five Below (NASDAQ:FIVE) is favored for its mid-teen square footage growth and positive comparable store sales and traffic, with a current P/E ratio of 26 times for the calendar year 2025. Casey's General (NASDAQ:CASY) Stores is also recommended for its solid growth and pricing power in prepared meals, trading at 19.5 times P/E.

The analysis provided by Evercore ISI highlights the mixed outlook for Dollar General, acknowledging the company's recent improvements in customer engagement while also considering the broader competitive landscape and internal challenges that could impact the pace of its financial recovery.

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