Free Trial

Should Dollar General or Dollar Tree Give Investors a Case of FOMO?

Should Dollar General or Dollar Tree Give Investors a Case of FOMO?

Dollar stores are on fire, but does the post-earnings rally have legs? 

Shares of Dollar General (NYSE: DG) and Dollar Tree (NASDAQ: DLTR) are rallying the day after both companies reported strong earnings. In late-day trading, DLTR stock was leading the NASDAQ index with a 21% gain. For its own part, Dollar General posted a gain of over 13%.  

In fairness, both stocks plummeted last week in what could be described as guilt by association. The dour outlooks from Target (NYSE: TGT) and Walmart (NYSE: WMT) stoked investor fear.  

But is this rally a sign that retail is recovering, a dead cat bounce...or is it something else? In late May, U.S. Treasury Secretary Janet Yellen started uttering the “S” word. That word is stagflation. However, with or without stagflation, many stock analysts are concerned about the possibility of a recession. And let’s be clear, even if neither of these worst-case scenarios comes to pass, it will take a long time before the economy is firing on all cylinders. 

The Consumer is Under Pressure 

So far, consumer spending is remaining surprisingly resilient. But that’s a lagging indicator. By that, we mean that the data comes out after the money has already been spent. Consumer sentiment on the other hand is falling. And that’s a leading indicator. That sentiment leads us to believe that consumers are looking to stretch their dollars further. 

And in those scenarios, they turn to dollar stores. That thesis is fueling excitement for Dollar General and Dollar Tree stocks. In this article, we’ll look at each stock and let you know if either, or both, are worth buying after this rally. 

Dollar Tree is Upping Its Guidance 

Dollar Tree’s revenue came in 2% above analysts’ expectations. But what excited investors is the company beating earnings expectations by 18%. Furthermore, the company raised its earnings outlook for the year citing its pricing power. The company has managed to increase prices by about 25% so far this year. That’s significant because the company’s Dollar Tree stores now have prices of $1.25 as opposed to $1.  

However, Dollar Tree is also the parent company of Family Dollar. And the company continues to open its combination stores which bring the everyday low prices of Dollar Tree into a Family Dollar footprint. Plus, the company is expanding the store-in-store concept with the Dollar Tree Plus stores inside Dollar Tree stores. This is where the company has merchandise that it sells for anywhere from $3 to $5.  

Dollar General Continues to Show Why Location Matters 

The bullish narrative for Dollar General is that it is continuing to aggressively expand its store count. But the company is being strategic about it. The company focuses on serving rural areas or small towns where they are away from mass merchandisers like Walmart or Target. I’ve remarked in the past that in my small town, I have three DG locations within about five miles of where I live. 

With customers being concerned about not just the budget for food and household items but also with their gas budgets, this should be a winning strategy as consumers will be able to get a good value while being able to make a tank of gas last longer.  

And the Winner Is...? 

At one time or another, I’ve given each stock a nod over the other. And as long-term investments, both stocks deserve a place in your portfolio. However, in this exact moment, I’m more inclined to buy Dollar General stock.  

My reasoning is simple. It offers a dividend that Dollar Tree does not. Don’t get me wrong, there are much better dividend stocks than Dollar General. However, the dividend does offer some protection in case the market is doing a head fake. I’ve been doing some nibbling in the market, but one rule I have right now is that any new position I take has to be a stock that offers a dividend. I’m not choosing Dollar General at this time, but it’s on my watch list and perhaps it should be on yours.  

→ AI’s Biggest Problem (From Weiss Ratings) (Ad)

Should you invest $1,000 in Dollar General right now?

Before you consider Dollar General, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Dollar General wasn't on the list.

While Dollar General currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

The 10 Best AI Stocks to Own in 2024 Cover

Wondering where to start (or end) with AI stocks? These 10 simple stocks can help investors build long-term wealth as artificial intelligence continues to grow into the future.

Get This Free Report
Chris Markoch
About The Editor

Chris Markoch

Editor & Contributing Author

Retirement, Individual Investing

Like this article? Share it with a colleague.

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Dollar General (DG)
4.7657 of 5 stars
4.77 / 5 stars
Dollar Tree (DLTR)
4.6307 of 5 stars
4.63 / 5 stars
$106.56-0.1%N/A-23.22Moderate Buy$141.55
Target (TGT)
4.7044 of 5 stars
4.70 / 5 stars
$149.73-1.6%2.94%16.80Moderate Buy$176.57
Walmart (WMT)
4.7237 of 5 stars
4.72 / 5 stars
$70.75-0.1%1.17%30.28Moderate Buy$71.09
Compare These Stocks  Add These Stocks to My Watchlist 

Featured Articles and Offers

Opportunities Arise as Stock Market Rotates from Big Tech

Opportunities Arise as Stock Market Rotates from Big Tech

Discover how the great stock rotation is shaking up the market and what it means for your investments, including the companies poised for growth.

Related Videos

3 Top Market Leaders Splitting Their Stocks
CPI News Breakdown: Key Market Moves to Follow
Inside Pelosi’s Latest Stock Moves

Stock Lists

All Stock Lists

Investing Tools

Calendars and Tools

Search Headlines