Dollar General Corporation (DG), headquartered in Goodlettsville, Tennessee, is a discount retailer that provides various merchandise products. Valued at $16.1 billion by market cap, the company offers a broad selection of merchandise, including consumable products such as food, paper and cleaning products, health, beauty, pet supplies, and non-consumables such as seasonal merchandise. 

Shares of this leading discount retailer have significantly underperformed the broader market over the past year. DG has declined 40% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 31.1%. In 2024, DG stock is down 45.6%, compared to the SPX’s 24.7% rise on a YTD basis. 

Narrowing the focus, DG’s underperformance is apparent compared to the SPDR S&P Retail ETF (XRT). The exchange-traded fund has gained about 24.4% over the past year. Moreover, the ETF’s 9.1% gains on a YTD basis outshine the stock’s double-digit losses over the same time frame.

The recent underperformance of DG can be linked to increased margin pressure and challenging consumer conditions. As one of the poorest performing retailers in the market, DG has faced struggles due to a lack of consumer spending and competition from major retailers like Walmart Inc. (WMT). The decline in its stock, as well as its peers', since Donald Trump's presidency could be attributed to potential import tariffs on Chinese goods, which could lead to increased costs for DG who sources a significant portion of its inventory from China.

On Aug. 29, DG shares plummeted over 32% after reporting its Q2 results. Its revenue was $10.2 billion, missing analyst estimates of $10.4 billion. The company’s EPS of $1.70 failed to meet analyst expectations of $1.79.

For the current fiscal year, ending in January 2025, analysts expect DG’s EPS to decline 22.5% to $5.85 on a diluted basis. The company’s earnings surprise history is mixed. It beat the consensus estimate in three of the last four quarters while missing the forecast on another occasion.

Among the 29 analysts covering DG stock, the consensus is a “Moderate Buy.” That’s based on 10 “Strong Buy” ratings, one “Moderate Buy,” 16 “Holds,” one “Moderate Sell,” and one “Strong Sell.” 

This configuration is more bullish than a month ago, with nine analysts suggesting a “Strong Buy.”

On Nov. 18, BMO Capital kept a “Market Perform” rating and lowered the price target on DG to $80, implying a potential upside of 8.2% from current levels.

The mean price target of $95.82 represents a 29.6% premium to DG’s current price levels. The Street-high price target of $125 suggests an ambitious upside potential of 69.1%.