Dollar General Shares Fall More Than 40% for a 2nd Straight Year. Can Investors Trust This Stock?

Core Viewpoint - Dollar General's stock has experienced significant declines in 2024, mirroring the previous year's performance, with a drop of 44% this year and nearly 45% last year, attributed to rising costs and increased competition [1][2]. Financial Performance - In 2024, Dollar General struggled to generate meaningful growth, with its core customers being "financially constrained," leading to reduced discretionary spending [2]. - Comparable sales growth has been around 2% or less in each of the past three quarters, indicating limited organic growth [3]. - The company has faced over a 20% decline in operating profit compared to the previous year in each of the past three quarters [5]. Strategic Focus - Concerns have been raised about the company's focus on growth rather than improving margins and profitability, with significant spending on remodeling and new store openings [4]. - Dollar General operates over 20,000 stores, which complicates efficient expansion into new markets without cannibalizing existing sales [4]. Investment Considerations - The stock is trading at a low valuation of 12 times its trailing profits, but continued profit declines could render it a value trap for investors [7]. - There is skepticism about whether the company can demonstrate a stronger financial outlook moving forward, making it advisable to avoid the stock until a clearer path to profitability is established [8].