Dollar General

Why Dollar General Stock Is Down By 6% Today

Dollar General Stock Declines After Q2 2021 Earnings Report

Shares of Dollar General found themselves under pressure after the company released its second-quarter report. Dollar General reported revenue of $8.65 billion and GAAP earnings of $2.69 per share, beating analyst estimates on both earnings and revenue.

The company noted that same-store sales declined by 4.7% compared to the second quarter of 2020 due to decline in customer traffic.

Dollar General has also updated its guidance for the fiscal year 2021 and now expects that its net sales would grow by 0.5% – 1.5% while same-store sales would decline by 2.5% – 3.5%. The company expects to report earnings of $9.60 – $10.20 per share compared to the previous estimate of $9.50 – $10.20 per share.

Dollar General has also noted that pandemic-related uncertainty remained, and the company expected that transportation and distribution costs would increase for the remainder of fiscal 2021. The market has clearly expected a more enthusiastic report, so the stock dived below $220 and made an attempt to settle below $115.

What’s Next For Dollar General Stock?

Analysts expect that Dollar General will report earnings of $10.22 per share this year and $11.22 in the next year, so the stock is trading close to 20 forward P/E. Such valuation levels look normal in the current market environment, and Dollar General is valued similar to many peers.

In this light, it does not look that there is significant potential for multiple compression in the near term unless there is a broad sell-off in the market.

At the same time, it should be noted that the market expected better results from the company, and it remains to be seen whether the current pullback will immediately attract speculative buyers. The market remains growth-oriented, so any concerns about the pace of growth may have a material negative impact on the stock.

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