Dollar General Essay

1131 Words3 Pages

Introduction
Founded in 1939, Dollar General Corporation is a U.S. based discount retailer headquartered in Goodlettsville, Tennessee. The company has over 13,000 stores - focusing on rural areas on the eastern, Midwestern and southern states. Its merchandise includes household goods, consumables, and apparel coming from either external manufacturers or their own private brand. Its stock is publicly traded on the New York Stock Exchange (NYSE) and is currently priced at around $93.38, with a market capitalization of $25.52 billion, and an EPS of 4.51 according to Yahoo Finance. Dollar General’s competitors in the discount consumer market include Walmart, Dollar Tree and Target – as well as local discount and convenience stores.
Why is Dollar …show more content…

Even though dollar general’s gross margin has been contracting, the company been trying to find solutions such as reducing expenses through budgeting program, lowering transportation costs and cutting unnecessary costs that don’t give value to customer experience. Comparing to other main competitors such as Dollar Tree, Target and Walmart, Dollar General is the only company who is in the range of 30 since year 2009 and has been firmly fixed within that range. Moreover, the drastic enhancement of company’s EPS gives investors solid evidence why dollar general is a good investment. In year 2009, the company starts off with only 0.34; however, it increases to 4.43 in less than a decade. Gross margin is used to determine the liquidity a company has. In addition, comparing the average gross margin of the industry of 29.19 percent to Dollar General of 30.85 in year 2017 and 30.96 in year 2016, …show more content…

Dollar General corporation’s current ratio for 2016 fiscal year is 1.402. While the acceptable range is between 1 and 2, investors normally seek value that is closed to 2 due to the margin of safety; although in the case of Dollar General corporation, a current ratio of 1.4 is acceptable, considering the nature of discount, variety stores sector, which the sector’s average is 1.07 according to Stock Analysis on Net, because consumer merchandises can be liquidated into cash easier compared to other sectors. But against its direct competitor, Dollar Tree corporation, Dollar General falls behind by 0.47. Moreover, Dollar General’s current ratio for its 2016 fiscal year has decreased from 1.72 to 1.40 when being benchmarked against its previous fiscal year in 2015. Despite the negative trends, Dollar General’s financial health is anything but worrying because having a current ratio of 1.40 implies there are more expected cash inflows in the short term. Furthermore, a decreasing current ratio shows its efficient utilization of capital to grow, which supports Dollar General’s initiative to expand its level of operation through opening of smaller format stores and new distribution centers in Texas, Wisconsin, Georgia as well as relocating and remodeling 2,702 stores under their DG16 layout format. The initiative results a 362.27% increase

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