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On Wednesday, Citi analysts raised the price target for Dollar General (NYSE:DG) stock to $112 from $101, while maintaining a Neutral rating. The decision follows Dollar General’s first-quarter earnings report, which exceeded consensus estimates. The company reported strong comparable sales and gross margins, contributing to earnings per share that surpassed expectations. According to InvestingPro data, the stock has shown remarkable momentum, gaining over 15% in the past week and 50% year-to-date, though the RSI suggests the stock is currently in overbought territory.
Dollar General experienced a 61 basis point benefit from shrink in the first quarter, a trend management expects to continue throughout the year. The company attributes some of its sales strength to a trade-down effect, with middle and higher-income consumers seeking value. This shift has helped bolster the company’s performance, particularly in the first quarter of 2025, with the company maintaining a healthy gross profit margin of 29.8%.
Despite the positive quarterly results, Citi analysts expressed concerns about Dollar General’s ability to compete with larger retailers like Walmart (NYSE:WMT) in terms of delivering value and convenience. Although the shrink benefit is anticipated to be a tailwind this year, the analysts view the stock’s risk and reward as balanced, with a slightly negative outlook due to long-term challenges.
Dollar General shares are currently trading at 9.4 times the forecasted 2025 enterprise value to EBITDA ratio. The analysts’ comments suggest a cautious stance on the stock’s future performance, despite the recent price target increase.
Management remains optimistic about the company’s prospects for the remainder of the year, supported by the company’s solid financial health metrics and its position as a prominent player in the Consumer Staples Distribution & Retail industry. However, the ongoing challenge of competing with industry giants remains a significant consideration for investors. InvestingPro subscribers can access additional insights through eight more exclusive ProTips and comprehensive financial metrics to make more informed investment decisions.
In other recent news, Dollar General reported strong first-quarter results, with a 2.4% increase in comparable store sales, surpassing expectations. The company’s earnings per share exceeded forecasts, driven by higher sales and improved gross margins, benefiting from reduced shrink. Following these results, Dollar General updated its 2025 guidance, raising expectations for comparable store sales and overall sales. Oppenheimer analysts upgraded Dollar General’s stock rating to outperform, setting a new price target of $130, due to confidence in the company’s resilience and strategic goals. Telsey analysts also raised their price target to $120, noting the company’s performance and increased spending from middle- and higher-income households. BofA Securities increased their price target to $135, highlighting Dollar General’s "Back to Basics" strategy and operational efficiencies. Truist Securities raised their price target to $112, while maintaining a Hold rating, emphasizing the improved product mix and reduced shrink. Analysts remain optimistic about Dollar General’s strategic initiatives, but some express caution regarding tariffs and consumer behavior.
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