Dollar General Less Immune Than Other Discounters To The Wal-Mart Effect

Dollar General Corp. (NYSE: DG) is expected to report Q3 results during pre-market trading Thursday. Competitor Dollar Tree, Inc. (NASDAQ: DLTR) reported better-than-expected Q3 results, and some investors are expecting a similar outperformance from Dollar General, according to Barclays analyst Karen Short. 

Short remains cautious on the discount retailer, maintaining an Equal-Weight rating and $70 price target on the stock. Expectations have only increased following Dollar Tree’s earnings report on November 22, implying no change in the two-year trends, according to the analyst, who also cited a divergence in headwinds for the two dollar-store stocks.

Headwinds Diverge

Evidence of Wal-Mart Stores, Inc. (NYSE: WMT) lowering food prices in some geographies likely put more pressure on Dollar General than Dollar Tree, as the latter has a more discretionary mix.

Moreover, Dollar General had a number of broad sweeping price reductions, which were likely introduced broadly in Q3, said Short. 

At last check, Dollar General shares were down 0.81 percent at $79.41.