Investing.com -- Citi upgraded Dollar General (NYSE:DG) to Neutral from Sell saying the discount retailer is better positioned than peers to weather the new tariff environment and a potential consumer slowdown.
The bank said only about 10% of Dollar General’s sales are likely affected by tariffs, far below the 50-100% exposure seen across much of the retail sector.
With most of its business tied to food and consumables, Citi said the company is insulated from the discretionary spending pullback that could result from rising costs.
“In the near-term DG does not have the same tariff risk as most others in our retail universe,” analyst at Citi wrote adding that the retailer could benefit as consumers trade down to lower-priced options, given its mindshare for value.
“Taking a 12-month view, we no longer believe a Sell rating is warranted, as consumables-based businesses are likely to fare better than those selling more discretionary products”
While long-term competitive pressure from Walmart (NYSE:WMT) remains a concern, Citi said Dollar General’s strong value positioning may help it avoid major hits from a weakening consumer.
The firm raised its fiscal 2025 earnings estimate to $6.07 from $5.51 and lifted its price target to $101 from $69, citing a lower discount rate and higher valuation multiple.
Citi said Walmart’s commentary at its upcoming investor day on April 8-9 could be key. If Walmart passes higher tariff-related costs onto consumers, Dollar General could have pricing cover, but any move to invest aggressively in price could weigh on DG.
Dollar General operates thousands of small-box discount stores across the U.S., with a focus on low-price consumables.
