Dollar Tree and Dollar General recently announced their fourth quarter financial results on March 13th and 14th, respectively, and although the companies have seemingly similar business models, they are grappling with different challenges. There is.
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Peter C. Earle, senior economist at the National Bureau of Economic Research, said investors can note several points of differentiation between the two companies.
“Comparing their respective gross profit margins shows how efficiently both are converting revenue into profits, with higher margins indicating better cost control and perhaps greater pricing power in the market,” he said. It will increase,” he said. “All of these tend to mean higher profits over time, which in turn means higher stock prices.”
Additionally, Earl points out that in the case of such retail companies, those with a larger number of stores and a wider geographical presence are more likely to be diversified to regional/state issues, as well as to He pointed out that the outlook for growth is likely to be better.
He added, “A very general rule of thumb is to compare store sales growth, i.e. compare sales growth for stores that have been open for more than a year.”2 Comparing their store sales growth could reveal which companies have more comparable sales growth. Rather than simply opening as many new stores as possible, we generate growth organically.
So which stocks are better investments?
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dollar tree
Dollar Tree reported a net loss of $1.71 billion, or $7.85 per share, for the quarter ended Feb. 3, according to its earnings report. Meanwhile, CNBC reported profit in the same period last year of $452.2 million, or $2.04 per share. .
As previously reported by GOBankingRates, the company also announced on March 13 that it would close 600 Family Dollar stores in the first half of fiscal 2024, and an additional 370 stores as their leases expire.
“Continuing inflation and cuts in government benefits are hurting low-income families, who make up a significant portion of Family Dollar's customer base,” CEO Rick Dreiling said on a call with analysts, according to records. “Consumers continue to be under pressure.”
According to a March 16 research note, CFRA Research's opinion is “sell.”
“While the Dollar Tree banner continues to exceed expectations, the Family Dollar banner continues to underperform on several metrics,” equity analyst Arun Sundaram, CFA, CPA, wrote in a note. writing.
Additionally, CFRA expects FY25 to be another challenging year.
“DLTR's decision to close approximately 1,000 underperforming Family Dollar stores casts doubt on the banner's long-term growth,” Sundaram added.
dollar general
Net sales for the fourth quarter ended Feb. 2 fell 3.4% to $9.9 billion, compared with $10.2 billion in the fourth quarter of fiscal 2022, according to the earnings report.
CFRA Research's view on the stock is a buy, according to a March 16 note.
Sundaram said that while the past few years have been difficult for DG given the weak macroeconomic conditions and self-inflicted wounds, “the company is on the right track with CEO Todd Vasos back in charge.” We believe.'' ”
“Staffing and inventory levels have already improved, and our goal for 2025 is to address supply chain contraction and realize efficiencies,” Sundaram said. “If the macro environment improves and discretionary sales recover, further upside is expected.''
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This article originally appeared on GOBankingRates.com: Dollar Tree vs. Dollar General Stock: Which is the better investment?
