In uncertain economic times like the ones we find ourselves in now, dollar stores such as Dollar General (DG) should be doing a booming business. So why is Dollar General struggling to find customers right now?
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Dollar stores have not done well in recent months. Shares are plunging, and leadership is constantly in flux. Dollar General lost a CEO in October 2023, and that—coupled with the share price losses—is calling particular attention to not just Dollar General, but others in the sector like Dollar Tree (DLTR).
Retail analyst Peter Keith, who has a five-star rating on TipRanks, took a look at the conditions, and found a refrain that is increasingly common. Basically, while worsening economic conditions do normally help dollar stores, worsening economic conditions featuring high inflation tend to prompt lower-end consumers to pullback from spending altogether.
Worse, dollar stores began to cut costs to keep pace with growing competition, which led to poor customer experiences.
Fighting Back
Meanwhile, Dollar General is fighting back by bringing in some new blood to its upper ranks. Some here might say that money would be better served on more staff to improve the customer experience, but Dollar General made its choice. Tom Hutchins is now senior vice-president of technology, while Kevin Pinchon has been named senior vice-president of distribution.
The two new hires are expected to provide impact to “service, safety and other efforts that yielded savings,” according to executive vice-president of global supply chain Rod West. But with more retailers focusing on price, it remains to be seen just what Hutchins and Pinchon can do to address the problems.
Is Dollar General Stock a Buy?
Turning to Wall Street, analysts have a Hold consensus rating on DG stock based on four Buys, seven Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 40.15% loss in its share price over the past year, the average DG price target of $95.33 per share implies 20.44% upside from current levels.
