Dollar Stores See Tailwinds Dissipating

Credit Suisse analyst Edward Kelly is bearish on dollar stores Dollar General Corp. (NYSE: DG) and Dollar Tree, Inc. (NASDAQ: DLTR) and cut the target price for both stocks. On Dollar Tree, he maintains an Underperform rating and cut the target price from $76 to $69. On Dollar General, the analyst maintains a Neutral rating and lowered his target price from $80 to $70.

“The bloom is clearly off the rose on Dollar General and Dollar Tree, as recent weak results and intensifying competition have raised concerns about the outlook for each company,” said Kelly.

Related Link: Wal-Mart To Update Investors On The Progress Of Its 3-Year Plan

Wal-Mart Stores, Inc. (NYSE: WMT)’s upcoming investor day could be a negative catalyst for dollar store stocks, as an update on the retailer’s multi-billion-dollar price cut is likely, according to the analyst.

“Reiterating its commitment to the program and highlighting early success alone would be a concern for competitors, but any acceleration in the investment would be a clear incremental negative,” said Kelly.

Overall, Kelly cited promotional activities at staple retailers, rising gas prices and reduced SNAP benefits as factors to his bearish outlook.

At Last Check ...

• Dollar General was down 0.56 percent at $67.67.
• Dollar Tree was down 0.6 percent at $75.97.
• Wal-Mart was up 0.49 percent at $72.10.

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