Dollar General Corp.

Overview Key strengths Key risks Largest dollar store chain in the U.S. by sales and store count Freight and supply chain disruptions remain the biggest near-term challenges. Labor turnover and wage pressure also persist. A countercyclical business that is less exposed to online disruption. Stiff competition from Dollar Tree, Walmart, and other discount retailers. Strong liquidity supported by consistent free cash flow generation. Core, lower-income customers? spending power is limited and vulnerable to higher unemployment and living expenses. A moderate financial policy with a commitment to an investment-grade rating and a public leverage target of 3x EBITDAR. Risk of the discount subsector becoming saturated despite closings in the overall retail sector Dollar General experienced elevated costs in fiscal 2021 and

...A weaker consumer could weigh on margins, though Dollar General Corp.'s performance has been resilient despite a weaker macro environment, including elevated inventory costs, freight costs, and global supply chain issues. Dollar General experienced elevated costs in fiscal 2021 and continues to experience increased import freight costs because of a decrease in transportation capacity for overseas shipments, port closures or congestion, and labor shortages. Consequently, the company reported a comparable-store sales decline of 2.8% in fiscal 2021 (ended in January 2022) primarily due to a decrease in traffic offset by growth in average basket size. Moreover, Inflationary pressures such as wages and transportation are currently margins, and we expect these to remain headwinds for the next year. Strong store economics and increasing demand for lower prices continue to fuel above-average unit growth. Despite lower margins, the company has been able to grow revenue sufficient to maintain earnings...

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