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Dollar General Corp DG

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Dollar General’s Sales Stay Strong as Comparisons Become More Difficult, but the Shares Seem Rich

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Narrow-moat Dollar General posted a strong start to fiscal 2021, with same-store sales falling by only 4.6% despite nearly 22% expansion in the same period of fiscal 2020. Our near-term targets should rise, offsetting the impact of a higher long-term tax rate assumption to leave our $183 per share valuation roughly in place. We still expect mid-single-digit percentage top-line growth and high-single-digit operating margins over the next decade.

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Company Profile

Business Description

A leading American discount retailer, Dollar General operates over 17,000 stores in 46 states, selling branded and private-label products across a wide variety of categories. In fiscal 2020, more than 76% of net sales came from consumables (including paper and cleaning products, packaged and perishable food, tobacco, and health and beauty items), 12% from seasonal merchandise (such as toys, greeting cards, decorations, and gardening supplies), 7% from home products (for example, kitchen supplies, small appliances, and cookware), and 5% from basic apparel. Stores average roughly 7,400 square feet, and about 75% of Dollar General locations are in towns of 20,000 or fewer people. The firm emphasizes value, with more than 80% of its items sold at everyday low prices of $5 or less.

Contact
100 Mission Ridge
Goodlettsville, TN, 37072
T +1 615 855-4000
Sector Consumer Defensive
Industry Discount Stores
Most Recent Earnings Apr 30, 2021
Fiscal Year End Jan 31, 2022
Stock Type Aggressive Growth
Employees 158,000

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