Shares of Dollar General (NYSE: DG) were moving lower today, even though there was no company-specific news out on the discount retailer. Instead, the move seemed to come in response to disappointing results from Target (NYSE: TGT) this morning, which seemed to confirm that Walmart (NYSE: WMT), which reported earnings yesterday, is continuing to gobble up market share from competitors like Target and Dollar General.
As of 1:19 p.m. ET, Dollar General stock was down 4.5%.
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Dollar General's weakness continues
Investors seem to be preparing themselves for a disappointing earnings report from Dollar General when the discount retailer offers up its third-quarter results on Dec. 5.
Yesterday, OTR Global downgraded Dollar General from "positive" to "mixed" as channel checks indicated some challenges at the retailer heading into the earnings report, but the report from Target seemed to be the main factor in the stock's decline today.
Target shares plunged more than 20% after it missed estimates on both the top and bottom lines and reported comparable sales growth of just 0.3% and a decline in gross margin. Investors saw it as evidence that Walmart, whose U.S. stores delivered 5% comparable sales growth in its third quarter continues to take market share from rivals and weigh on margins in the industry.
What it means for Dollar General
Dollar General has been one of the worst-performing retailers this year, seemingly due to a combination of weak consumer spending and pressure from Walmart. The stock is down 44% year to date and has continued to drift lower after a dismal second-quarter earnings report.
Expectations are low coming into the retailer's next update as the analyst consensus calls for revenue growth of 4.6% to $10.1 billion but for earnings per share to fall from $1.26 to $0.95. That's a low bar for the company, but given the weakness at Target, it's not surprising investors are sending the stock lower today.
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Jeremy Bowman has positions in Target. The Motley Fool has positions in and recommends Target and Walmart. The Motley Fool has a disclosure policy.
