Why Dollar General Stock Fell 44% in 2024

Core Viewpoint - Dollar General's stock experienced a significant decline due to inflation, weak consumer spending, operational challenges, and competition from larger retailers like Walmart, despite modest revenue growth [1][2]. Financial Performance - The stock lost 44% in 2024, primarily driven by a poor earnings report in August [2]. - On August 29, the stock dropped 32% following disappointing second-quarter results, with same-store sales increasing by only 0.5% and revenue rising 4.2% to $10.2 billion, falling short of the consensus estimate of$10.37 billion [3]. - Gross margin decreased from 31.1% to 30% due to higher markdowns and inventory damages, while selling, general, and administrative expenses rose from 24% to 24.6%. Consequently, operating income fell from $692.3 million to$550 million, and earnings per share dropped 20% to $1.70, below the consensus of$1.79 [4]. Guidance and Strategy - Management revised its sales growth forecast down from 4.7% to 5.3% and adjusted EPS expectations from a range of $6.80 to$7.55 to $5.50 to$6.20, significantly below the consensus of $7.12 [5]. - The guidance cut highlighted the challenges faced by the company, but management remains committed to its "Back to Basics" strategy, focusing on improving stock availability and checkout efficiency [6]. Future Outlook - Following the August decline, the stock saw modest declines for the remainder of the year, but signs of stabilization appeared in the third-quarter earnings report as turnaround initiatives began to take effect [7]. - Despite intense competition from Walmart, the stock is considered undervalued with a price-to-earnings ratio of 12, suggesting potential rewards for patient investors [7].