Of all the retail names traded in the markets, Dollar General Corp. (NYSE:DG) is among the most disappointing. Some companies within the embattled sector, such as J C Penney Company Inc (NYSE:JCP), are expected to do poorly because of lagging financials, fierce competition and the impact of Amazon.com, Inc. (NASDAQ:AMZN). But discount retailers typically serve an immediate need and are usually immune from online competition. Yet DG stock is up less than 5% for the year.
At this point, most retailers will take any bit of good news, even if it means conspicuously underperforming benchmark indices. In that respect, Dollar General is holding its own. But clearly, management needs to kick things into high gear if DG stock is going to remain a viable investment.
Shares are badly underperforming discount specialist Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), which is up nearly 54% year-to-date. Additionally, big-box retailer Wal-Mart Stores Inc (NYSE:WMT) potentially makes Dollar General redundant.
One of the big misconceptions in the ugly retail markets is that only discretionary consumables are impacted. That sounds like a logical conclusion, given that financially stressed families will only purchase absolute necessities. Unfortunately, much pain exists. Whether we’re talking about the subprime loan crisis in the automotive sector or generic soda drinks, Americans are skimping everywhere.
While discretionary consumables experience the most dramatic declines, demand for discount retailers peaked in late 2011. Obviously, that bodes poorly for Discount General stock. And though Trump may boast about multi-year record low unemployment rates, cost-of-living expenses outpace wages for many Americans.
Again, unless you’re Amazon, doing business in retail simply stinks.
DG Stock Can Enjoy Near-Term Tailwinds
With all that said, investors shouldn’t count out Dollar General stock ahead of its second quarter of fiscal 2018 earnings report. Analyst consensus pegs DG’s earnings per share to hit $1.09, which is the exact same target for Q2 in the prior year.
DG stock came up short for FY 2017. However, the most recent two earnings reports delivered a pair of positive surprises to help reverse the negative momentum. Furthermore, traders are recently getting enthused about DG’s prospects. On a YTD basis, shares entered…