Citi Downgrades Dollar General to Sell, Citing Competitive Pressures

Dollar General (NYSE:DG) shares fell nearly 2% pre-market today after Citi analysts downgraded the company to Sell from Neutral, lowering the price target to $73 from $91.

The analysts cited Dollar General’s struggles over the past fiscal years, with comparable sales growth remaining modest and EBIT margins for fiscal 2024 estimated at 4.7%, significantly down from 8.4% in 2019, despite the company’s sales base being nearly 50% larger than in 2019. The analysts noted that changes in industry dynamics over the last five years have negatively impacted Dollar General's competitive positioning.

The analysts highlighted Walmart as a major factor, pointing to Walmart's ability to outperform on both value and convenience, areas where Dollar General had traditionally excelled. They emphasized that Walmart’s growing market share, particularly through its omni-channel delivery options, is a significant challenge for Dollar General, making recovery difficult.