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Dollar Tree Vs Dollar General: Which Is A Better Pick?
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A smart strategy suggests investors to exit underperforming stocks and instead, invest in the right stocks at the opportune moment. That said, let’s shift our attention to two major discount chains -- Dollar Tree, Inc. (DLTR - Free Report) and Dollar General Corporation (DG - Free Report) -- which have been having a head to head for a while now.
Notably, in a bid to take over Family Dollar, Dollar Tree defeated Dollar General and closed the buyout in Jul 2015. Now the question is whether Dollar Tree still has an edge over Dollar General? Well, to gauge which stock is a better investment pick, we need to analyze various aspects.
Tree Vs General
Starting with stock price movement, we note that Dollar Tree has seen its shares rise 6.7% on a year-to-date basis, faring better than Dollar General’s 0.1% slip. However, both the stocks witnessed a major slump in the past one month on account oflower-than-expected second-quarter fiscal 2016 results owing to pressure on food prices and a tough retail environment.
Further, sources revealed that the 14.4% and 22.1% respective decline in Dollar Tree’s and Dollar General’s stock price was a result of their rival supermarket bigwig – Wal-Mart Stores Inc.’s (WMT - Free Report) better-than-expected second-quarter performance. Analysts further stated that Wal-Mart witnessed one of its strongest comparable store sales (comps) growth in the quarter, as it reduced prices of some major traffic drivers, thus helping the pressurized consumers and shifting their focus away from the dollar stores.
Moving back to Dollar Tree and Dollar General, let’s take a look at their overall performance in the last quarter, along with their performance history.
Earnings Surprise History & Estimates
Though Dollar Tree and Dollar General missed earnings and sales estimates in the last reported quarter, the top and bottom lines improved year over year, with comps and margins also trending upwards. Notably, Dollar Tree has been posting positive comps for 34 straight quarters, whereas Dollar General has seen its comps rise over the past 26 years, thus highlighting its spectacular record.
A look at the companies earnings history reveals that Dollar Tree has outpaced the Zacks Consensus Estimate only once in the trailing four quarters, while Dollar General has missed the same only once. Nonetheless, both the companies have been witnessing a downtrend in their earnings estimates for fiscal 2016, over the past 30 days. While estimates for Dollar Tree have slipped 1.9% to $3.69, that for Dollar General has scaled down by 2.8% to $4.51, since the earnings release. Well, it seems that both these stocks are fighting exactly even in the Retail- Discount space.
Let’s now turn our attention to their fundamentals and growth strategies, which have been driving these bellwethers forward.
Fundamentals & Growth Strategies
Dollar Tree operates discount variety stores, offering merchandise at a fixed price of $1.00. The company, which also operates online, has stores across 48 U.S. states, the District of Columbia and Canada – underscoring its solid geographical reach. Moreover, integration of Family Dollar has expanded its presence and the company is on track to become a mega U.S. discount retailer that can counter competition single handedly in the dollar-discount store segment. Dollar General, however, is not far behind. The company trades in low priced merchandise, typically priced at $10 or less, and has over 13,000 stores across 43 states. Moreover, the company’s current market cap of $19.9 billion stands firm against Dollar Tree’s $19.3 billion.
On the one hand, Dollar Tree is progressing well with Family Dollar’s integration and its growth initiatives, which include store expansion strategies, enhancement of store productivity, creating new store formats, tapping into new markets and incorporating innovative sales channels to serve its patrons better. Further, we remain confident of the company’s strategies of increasing consumables mix, rolling out freezers/coolers at stores along with multi-price point expansion to boost top-line performance. Also, in order to improve operating margin, the company is focusing supply chain efficiency and aggressive cost cuts.
Well, Dollar General is also firing on all cylinders as the company’s commitment toward better price management, cost containment, private label offering, store expansion, effective inventory management, merchandise and operational initiatives are likely to drive sales and margins. Moreover, in order to drive traffic, Dollar General is focusing on both consumables and discretionary categories, and items ranging between $1 and $5. The rollout of tobacco has been a key factor in driving traffic. In addition, Dollar General is expanding its cooler facilities to enhance the sale of perishable items, and is also rolling out the DG digital coupon program.
So, as of now, Dollar Tree and Dollar General seem to be on par with each other. Comparing their long-term growth rates, Dollar Tree stands to have a long-term earnings growth rate of 17.1%, against Dollar General’s 14.3%. Dollar General is ready to forge ahead – as its P/E of 15.7x fares better than the industry average of 20.8x, while on the other hand, Dollar Tree is trading at a premium with P/E of 22.1x, thus having a very limited upside potential. Nonetheless, both the companies have a VGM style score of ‘A’, keeping the outcome uncertain.
Final Take
While still too close to call, Dollar Tree’s Zacks Rank #3 (Hold) fares better than Dollar General’s Zacks Rank #4 (Sell), thus giving investors reasons enough to hold on to it. Investors can also count on Big Lots Inc. (BIG - Free Report) , which sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Dollar Tree Vs Dollar General: Which Is A Better Pick?
A smart strategy suggests investors to exit underperforming stocks and instead, invest in the right stocks at the opportune moment. That said, let’s shift our attention to two major discount chains -- Dollar Tree, Inc. (DLTR - Free Report) and Dollar General Corporation (DG - Free Report) -- which have been having a head to head for a while now.
Notably, in a bid to take over Family Dollar, Dollar Tree defeated Dollar General and closed the buyout in Jul 2015. Now the question is whether Dollar Tree still has an edge over Dollar General? Well, to gauge which stock is a better investment pick, we need to analyze various aspects.
Tree Vs General
Starting with stock price movement, we note that Dollar Tree has seen its shares rise 6.7% on a year-to-date basis, faring better than Dollar General’s 0.1% slip. However, both the stocks witnessed a major slump in the past one month on account oflower-than-expected second-quarter fiscal 2016 results owing to pressure on food prices and a tough retail environment.
Further, sources revealed that the 14.4% and 22.1% respective decline in Dollar Tree’s and Dollar General’s stock price was a result of their rival supermarket bigwig – Wal-Mart Stores Inc.’s (WMT - Free Report) better-than-expected second-quarter performance. Analysts further stated that Wal-Mart witnessed one of its strongest comparable store sales (comps) growth in the quarter, as it reduced prices of some major traffic drivers, thus helping the pressurized consumers and shifting their focus away from the dollar stores.
Moving back to Dollar Tree and Dollar General, let’s take a look at their overall performance in the last quarter, along with their performance history.
Earnings Surprise History & Estimates
Though Dollar Tree and Dollar General missed earnings and sales estimates in the last reported quarter, the top and bottom lines improved year over year, with comps and margins also trending upwards. Notably, Dollar Tree has been posting positive comps for 34 straight quarters, whereas Dollar General has seen its comps rise over the past 26 years, thus highlighting its spectacular record.
A look at the companies earnings history reveals that Dollar Tree has outpaced the Zacks Consensus Estimate only once in the trailing four quarters, while Dollar General has missed the same only once. Nonetheless, both the companies have been witnessing a downtrend in their earnings estimates for fiscal 2016, over the past 30 days. While estimates for Dollar Tree have slipped 1.9% to $3.69, that for Dollar General has scaled down by 2.8% to $4.51, since the earnings release. Well, it seems that both these stocks are fighting exactly even in the Retail- Discount space.
Let’s now turn our attention to their fundamentals and growth strategies, which have been driving these bellwethers forward.
Fundamentals & Growth Strategies
Dollar Tree operates discount variety stores, offering merchandise at a fixed price of $1.00. The company, which also operates online, has stores across 48 U.S. states, the District of Columbia and Canada – underscoring its solid geographical reach. Moreover, integration of Family Dollar has expanded its presence and the company is on track to become a mega U.S. discount retailer that can counter competition single handedly in the dollar-discount store segment. Dollar General, however, is not far behind. The company trades in low priced merchandise, typically priced at $10 or less, and has over 13,000 stores across 43 states. Moreover, the company’s current market cap of $19.9 billion stands firm against Dollar Tree’s $19.3 billion.
On the one hand, Dollar Tree is progressing well with Family Dollar’s integration and its growth initiatives, which include store expansion strategies, enhancement of store productivity, creating new store formats, tapping into new markets and incorporating innovative sales channels to serve its patrons better. Further, we remain confident of the company’s strategies of increasing consumables mix, rolling out freezers/coolers at stores along with multi-price point expansion to boost top-line performance. Also, in order to improve operating margin, the company is focusing supply chain efficiency and aggressive cost cuts.
Well, Dollar General is also firing on all cylinders as the company’s commitment toward better price management, cost containment, private label offering, store expansion, effective inventory management, merchandise and operational initiatives are likely to drive sales and margins. Moreover, in order to drive traffic, Dollar General is focusing on both consumables and discretionary categories, and items ranging between $1 and $5. The rollout of tobacco has been a key factor in driving traffic. In addition, Dollar General is expanding its cooler facilities to enhance the sale of perishable items, and is also rolling out the DG digital coupon program.
So, as of now, Dollar Tree and Dollar General seem to be on par with each other. Comparing their long-term growth rates, Dollar Tree stands to have a long-term earnings growth rate of 17.1%, against Dollar General’s 14.3%. Dollar General is ready to forge ahead – as its P/E of 15.7x fares better than the industry average of 20.8x, while on the other hand, Dollar Tree is trading at a premium with P/E of 22.1x, thus having a very limited upside potential. Nonetheless, both the companies have a VGM style score of ‘A’, keeping the outcome uncertain.
Final Take
While still too close to call, Dollar Tree’s Zacks Rank #3 (Hold) fares better than Dollar General’s Zacks Rank #4 (Sell), thus giving investors reasons enough to hold on to it. Investors can also count on Big Lots Inc. (BIG - Free Report) , which sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Best Investment Ideas for Long-Term Profit
Today you can gain access to long-term trades with double and triple-digit profit potential rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information? Click here >>