With inflation on the run, watch Dollar General (DG).
Typically, it’s a solid stock when inflation runs amok, and when markets pullback.
According to CNN, “Middle-income and wealthier shoppers, pinched by inflation, are shopping more at Dollar General for essentials and discretionary items. Dollar General CEO Todd Vasos said the retail giant has been attracting customers earning $100,000 a year in recent weeks. Inflation has pushed up prices for groceries and gas, and now these shoppers are turning to Dollar General and others to try to save money.”
With that, earnings haven’t been too shabby.
In its second quarter, Dollar General reported Q2 earnings of $2.98 a share, which was better than the expected $2.94 a share. Sales were up to $9.4 billion, which met forecasts. Same-store sales were up 4.6% as compared to expectations for 3.9%.
The company increased its same-store sales forecast to a range of 4% to 4.5% for the fiscal year, from a prior call for 3% to 3.5%.
Helping, Guggenheim analyst John Heinbockel reiterated a buy rating on the DG stock. Piper Sandler raised its price target on DG to $273 from $265. Raymond James raised its target price to $285 from $160. Morgan Stanley raised its target to $270 from $250.
Even better for the stock, with inflation showing no signs of cooling off, dollar stores are attracting higher-income shoppers. “The consumer is trying to make ends meet, and when you have limited funds in your wallet, the dollar stores provide the ability to do that,” added Joseph Feldman, a senior analyst at Telsey Advisory Group, as quoted by The New York Times.