Dollar General: A Comeback on the Investor Horizon?

After significant price drops, Dollar General seems to have fallen out of favor with investors. Since March, the stock's value has halved, and since the end of August alone, it has dropped by 34 percent. Yet, beneath the darkness lies hope for the next morning – the current periods of weakness could be seen as an opportunity to invest in a potentially undervalued company. Dollar General has traditionally catered to lower-income households. Despite a challenging economic climate, this can present a competitive advantage. However, as CEO Todd Vasos lamented, these core customers are currently struggling with financial concerns and are staying away from the stores. This has contributed to a decline of over 30 percent in the stock. But the figures show an uptick: U.S. GDP growth in the third quarter was 3.2 percent, accompanied by a wage increase of 4 percent in September. Todd Vasos' return as CEO could be another positive aspect. He led Dollar General from 9,000 to over 20,000 stores at its peak. After a brief hiatus since 2022, he is back, ready to demonstrate his successful leadership skills once again. The shift to more efficient logistics and ordering systems, including investments in artificial intelligence, already marks the path to addressing current problems. Additionally, Dollar General has the opportunity to gain new market share thanks to the turbulence at competitors like Dollar Tree and Big Lots. Dollar Tree is exploring strategic alternatives for its Family Dollar locations, while Big Lots has filed for Chapter 11. This potentially provides room for expansion. Of course, the company remains a work in progress. The true proof of progress could be a recovery in sales at the same locations. Nevertheless, analysts are forecasting potential with a price target of 98.23 USD per share. Based on the current decline, it might be considered an overreaction. With ample risk appetite, Dollar General could prove to be a rewarding investment.