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DG – Market expectations are for Uniform ROA to rebound, but management may be concerned about travel demand, flight initiatives, and the MAX aircraft

May 14, 2021

  • Dollar General Corporation (DG:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 25.0x Uniform P/E. At these levels, the market is pricing in expectations for profitability to slightly rise, but management may have concerns about their strategic initiatives, store formats, and POP SHELF’s potential
  • Specifically, management may lack confidence in their ability to retain new customers and advance their operating priorities and strategic initiatives. In addition, they may have concerns about the impact of storms on store traffic, volatility in comp sales, and the uncertain impact of further stimulus packages. Furthermore, they may be overstating the potential of their new store formats, the capabilities of their high-capacity coolers, and the potential of their POP SHELF concept. Finally, they may be concerned about the sustainability of contributions from DG Fresh and their dry distribution center combination