Dollar General (NYSE:DG) stock hit new 52-week lows last week after the company reported underwhelming earnings numbers and lowered its guidance. Revenue for the period ending Aug. 2 totaled $10.2 billion and was up 4.2% year over year, but same-store sales rose by only 0.5%.
The company’s revenue came in lighter than analyst forecasts of just under $10.4 billion and its earnings per share of $1.70 was also lower than the $1.79 that analysts were expecting. Dollar General warned of a “financially constrained” core customer which is impacting its growth prospects. As a result, the company lowered its guidance, now expecting its sales growth for the fiscal year to be within a range of 4.7% to 5.3%, which is lower than its previous forecast of 6.0% to 6.7%.
Given that economic conditions may worsen next year and a recession may happen, there’s concern that things could go from bad to worse for Dollar General. Right now, new store openings are helping to prop up the company’s sales but the low same-store sales growth suggests that business isn’t all that strong.
Shares of Dollar General are down 36% year to date and the stock is trading at just 12 times its estimated future profits. While it may seem cheap, the retail stock comes with risk and uncertainty, which is why investors may still want to steer clear of it. The company is aggressively expanding but that may not be enough to lift its shares out of the current rut. Given the headwinds, investors may want to wait for an even further dip in price before buying shares of Dollar General.
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