Investopedia: Dollar General Stuck Between Value And Growth

It is true that people will continue to buy food and other necessities of life through good times and bad, but there can be some pretty significant shifts in how and where they do that buying. When times are good and there's room in the budget, places like Whole Foods (NYSE:WFM) and Fresh Market (NYSE:TFM) can draw in the traffic. Tough times, though, lead to tough decisions and can lead shoppers to consider trading down to the likes of Wal-Mart (NYSE:WMT) and the deep discount retailers collectively known as "dollar stores." 


While that does indeed seem to be happening for Dollar General (NYSE:DG), the question is whether investors are already too far ahead of the story. Dollar General is indeed bringing people into the stores and management deserves credit for maintaining solid margins, but it looks like the valuation already presupposes a lot of that performance.

A Surprisingly Strong Second Quarter
One of the recent themes for retailers has been the push/pull between preserving margins (by raising prices) and preserving market share as input costs keep rising. Wal-Mart and Target (NYSE: TGT), for instance, have generally chosen to preserve margins and the result has been unimpressive same-store sales. Dollar General has generally been going the other way.


Read more at the link below:
http://stocks.investopedia.com/stock-analysis/2011/Dollar-General-Stuck-Between-Growth-And-Value-DG-WMT-DLTR-NDN-FDO-SVU-WFM0831.aspx