Citi analyst Paul Lejuez maintained a Hold rating on Dollar General yesterday and set a price target of $112.00.
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Paul Lejuez has given his Hold rating due to a combination of factors impacting Dollar General’s current and future performance. The company’s recent earnings surpassed expectations, primarily driven by improvements in gross margin, notably from shrink initiatives. However, there are concerns about the sustainability of these gains, as the company faces challenges in achieving its long-term EBIT margin goals amidst competitive pressures from larger retailers like Walmart.
Management’s outlook suggests a cautious approach, with expectations of modest comparable sales growth and reliance on gross margin improvements to drive EBIT margin expansion. Despite seeing growth across various income brackets and a strong performance in non-consumables, the company’s valuation appears balanced with its current trading multiples. As a result, the risk and reward profile of Dollar General’s stock supports a Hold rating, reflecting both the potential and the uncertainties in its strategic execution.
DG’s price has also changed dramatically for the past six months – from $74.180 to $111.710, which is a 50.59% increase.