Non-Discretionary Retail Stocks Q4 Teardown: Dollar General (NYSE:DG) Vs The Rest
As non-discretionary retail stocks’ Q4 earnings season wraps, let's dig into this quarter's best and worst performers, including Dollar General (NYSE:DG) and its peers.
Food is non-discretionary because it's essential for life (maybe not those Oreos?), so consumers naturally need a place to buy it. Selling food is a notoriously tough business, however, as the costs of procuring and transporting oftentimes perishable products and operating stores fit to sell those products can be high. Competition is also fierce because the alternatives are numerous. While online competition threatens all of retail, grocery is one of the least penetrated because of the nature of the product. Still, we could be one startup or innovation away from a paradigm shift.
The 8 non-discretionary retail stocks we track reported a decent Q4; on average, revenues were in line with analyst consensus estimates while next quarter's revenue guidance was 0.8% above consensus. Investors abandoned cash-burning companies to buy stocks with higher margins of safety, but non-discretionary retail stocks held their ground better than others, with the share prices up 3.2% on average since the previous earnings results.
Weakest Q4: Dollar General (NYSE:DG)
Appealing to the budget-conscious consumer, Dollar General (NYSE:DG) is a discount retailer that sells a wide range of household essentials, groceries, apparel/beauty products, and seasonal merchandise.
Dollar General reported revenues of $9.86 billion, down 3.4% year on year, in line with analyst expectations. It was a decent quarter for the company, with revenue narrowly outperforming Wall Street's estimates on a same store sales beat. Another major positive was that its earnings forecast for the full year beat analysts' expectations (when excluding the impact of higher incentive compensation, which Wall Street likely wasn't modeling).
“We were pleased to deliver fourth quarter top and bottom-line results at the upper end of our internal expectations,” said Todd Vasos, Dollar General’s chief executive officer.
Dollar General delivered the slowest revenue growth of the whole group. The stock is down 4.4% since the results and currently trades at $151.
Read our full report on Dollar General here, it's free.
Best Q4: Walmart (NYSE:WMT)
Known for its large-format Supercenters, Walmart (NYSE:WMT) is a retail pioneer that serves a budget-conscious consumer who is looking for a wide range of products under one roof.
Walmart reported revenues of $173.4 billion, up 5.7% year on year, outperforming analyst expectations by 2.4%. It was a mixed quarter for the company, with revenue, gross margin, and EPS exceeding expectations. That performance was driven by beats in its U.S. and International Walmart operations. On the other hand, Walmart's Sam's Club division lagged Wall Street's projections, and its earnings forecast for the full year 2024 missed analysts' expectations.
Walmart scored the biggest analyst estimates beat among its peers. The stock is up 6.8% since the results and currently trades at $60.64.
Is now the time to buy Walmart? Access our full analysis of the earnings results here, it's free.
Dollar Tree (NASDAQ:DLTR)
A treasure hunt because there’s no guarantee of consistent product selection, Dollar Tree (NASDAQ:DLTR) is a discount retailer that sells general merchandise and select packaged food at extremely low prices.
Dollar Tree reported revenues of $8.64 billion, up 11.9% year on year, falling short of analyst expectations by 0.1%. It was a weaker quarter for the company, with full year revenue and EPS guidance both falling below Wall Street's estimates.
Dollar Tree pulled off the fastest revenue growth but had the weakest full-year guidance update in the group. The stock is down 15.2% since the results and currently trades at $127.05.
Read our full analysis of Dollar Tree's results here.
BJ's (NYSE:BJ)
Appealing to the budget-conscious individual shopping for a household, BJ’s Wholesale Club (NYSE:BJ) is a membership-only retail chain that sells groceries, appliances, electronics, and household items, often in bulk quantities.
BJ's reported revenues of $5.36 billion, up 8.7% year on year, falling short of analyst expectations by 0.7%. It was a weaker quarter for the company, with underwhelming earnings guidance for the full year.
The stock is up 3.6% since the results and currently trades at $74.88.
Read our full, actionable report on BJ's here, it's free.
Target (NYSE:TGT)
With a higher focus on style and aesthetics compared to other large general merchandise retailers, Target (NYSE:TGT) serves the suburban consumer who is looking for a wide range of products under one roof.
Target reported revenues of $31.92 billion, up 1.7% year on year, in line with analyst expectations. It was a mixed quarter for the company, with gross margin and operating profit exceeding expectations, which led to EPS outperformance versus Wall Street estimates. On the other hand, its earnings forecast for next quarter and the full year ending January 2025 missed analysts' expectations.
The stock is up 15.7% since the results and currently trades at $174.
Read our full, actionable report on Target here, it's free.
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