popshelf is Dollar General’s NEW Shopping Experience

Stock (Symbol)

Dollar General (DG)

Stock Price


Food & Necessities
Data is as of
October 16, 2020
Expected to Report
December 3
Company Description
Dollar General Corporation is a discount retailer. The Company offers a selection of merchandise, including consumables, seasonal, home products and apparel. The Company’s consumables category includes paper and cleaning products; packaged food; perishables; snacks; health and beauty; pet and tobacco products. Its seasonal products include decorations, toys, batteries, stationery, prepaid phones and accessories, and home office supplies. Its home products include cookware, craft supplies and kitchen, and bed and bath soft goods. Its apparel products include casual everyday apparel for infants, toddlers, girls, boys, women and men, as well as socks, underwear, disposable diapers, shoes and accessories. Source: Thomson Financial
Sharek’s Take
David SharekDollar General (DG) has been a big winner during the Coronavirus outbreak, as profits have jumped 73% and 79% the past two qtrs. And management is doing god things with the extra money, including increasing its stock buyback program by $2 billion and launching a new store concept called popshelf.

Dollar General just celebrated its 80th year in business. As of Fiscal 2019 the company operated 16,278 neighborhood locations in 44 states that offer food, snacks, beauty supplies, clothes, housewares and seasonal items at everyday low prices (~22% of products are priced at $1 or less). 75% of the U.S. population is within 5 miles of a Dollar General store. Dollar General is evolving from a dollar store to a local Walmart mini-me. Management has been renovating locations to make them newer and more efficient like adding coolers to sell more frozen foods, self-checkout machines, and Electronic Article Surveillance to reduce theft. 1670 store renovations are planned for 2020 while 1000 new stores are planned to open this year. Dollar General has three catalysts going for it right now:

  1. DG Fresh entails Dollar General taking over distribution of fresh and frozen food and stocking them from newly-built company-owned cold distribution facilities. DG also installed 45,000 new coolers last year, including some higher-capacity coolers that provide 45% more holding capacity than traditional coolers. This year the plan was to add 55,000 new coolers.
  2. Fast Track is a two-pronged program of streamlining the stocking process by having things more efficiently packed at the warehouse, and a self-checkout program to save time once customers are done shopping. Fast Track is expected to lower labor costs once the new checkout machines are installed and paid for.
  3. popshelf is a brand new concept geared towards suburban women. This new concept will have home decor, seasonal specials, health-and-beauty items, home cleaning supplies, party goods, and some Dollar General private brands — with 95% of the items $5 or less. popshelf stores are slightly larger than Dollar General stores, and each store will employ 15 people. The first two popshelf’s will open in Nashville any day now. There are plans for 30 popshelf’s by year-end.

This a well-managed operation, with a certainty during these uncertain times and consistency that’s been underappreciated. Dollar General has grown profits every year since its most recent IPO in 2009 and has grown same store sales for 30 consecutive years. In 2019 the company had an operating profit of $2.3 billion and returned $1.5 billion to shareholders through share repurchased and dividends. DG stock has an Estimated Long-Term Growth Rate of 15% per year in addition to a dividend yield of 1%. Management recently increased the dividend 12.5%. Dollar General continues to be one of the top stocks in the stock market and it still has HUGE upside to my Fair Value. DG is part of the Conservative Growth Portfolio and Growth Portfolio.

One Year Chart
Great profit growth the past two qtrs, with help from local governments which closed up non-essential businesses.

This /E of 22 is rally good. Wow! That’s a cheap price top

DG has an Est. LTG of 12% per year. That’s up from 11% last qtr, but it’s still not enough. I continue to think the company is a mid-teens grower.

Earnings Table
Last qtr, DG delivered profit growth of 79% and whipped estimates of 38%. Sales increased 24% and same store sales jumped 22%. Gross profit as a percentage of sales was an impressive 33%, up from 31% a year ago.

Annual Profit Estimates surged higher. But notice 2021 profits are expected to decline a bit from 2020.

Qtrly Estimates are for 38%, 20%, -14% and -12% profit growth the next 4 qtrs. These estimates increased as well.

Fair Value
My Fair Value P/E moves up from 29 to 30. This stock has HUGE upside to my Fair Value of $306.

But comparisons will be tough next year. Will DG continue to grow profits next year? We shall see.

Bottom Line
Dollar General (DG) has been a great investment the past decade, and it still has has a P/E of only 22. That’s so cheap! This stock should be a lot higher than it is. 

Small-store one-stop shops like Dollar General are on-point with their evolution into this area of retail. And I think popshelf will be a cute catalyst that could cause investors to give the stock a higher valuation (P/E).

DG ranks #1 in the Conservative Growth Portfolio Power Rankings. I am moving the stock up from 25th to 14th in the Growth Portfolio Power Rankings. Dollar General will also be added to the Aggressive Growth Portfolio.

Power Rankings
Growth Stock Portfolio

14 of 51

Aggressive Growth Portfolio

14 of 24

Conservative Stock Portfolio

1 of 35

Not a member? Sign up here for $25 a month.