What Happened:
Shares of discount retailer Dollar General (NYSE:DG) fell 29.7% in the afternoon session after the company reported second-quarter earnings results. Its full-year earnings forecast significantly missed analysts’ expectations. Management highlighted concerns similar to some of the retailers that reported this quarter. The company called out softer sales trends as customers felt financially constrained, In addition, revenue and EPS fell short of Wall Street’s estimates during the quarter. Overall, this was a weaker quarter.
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What is the market telling us:
Dollar General’s shares are not very volatile than the market average and over the last year have had only 9 moves greater than 5%. Moves this big are very rare for Dollar General and that is indicating to us that this news had a significant impact on the market’s perception of the business.
The biggest move we wrote about over the last year was 12 months ago, when the stock dropped 16.3% on the news that the company reported second quarter results with both its revenue and EPS missing analysts’ expectations. Gross and operating margins declined year on year.
Additionally, the company lowered full year guidance across the board, with a particularly jarring reduction in EPS outlook. Management acknowledged this, saying “While we are not satisfied with our overall financial results, we made significant progress in the second quarter improving execution in our supply chain and our stores, as well as reducing our inventory growth rate and further strengthening our price position.” Overall, this was a mediocre quarter for Dollar General.
Dollar General is down 37.9% since the beginning of the year, and at $87.13 per share it is trading 46% below its 52-week high of $161.22 from March 2024. Investors who bought $1,000 worth of Dollar General’s shares 5 years ago would now be looking at an investment worth $558.17.
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