Dollar General downgraded as Gordon Haskett highlights headwinds ahead
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Dollar General stock dipped on Friday as Gordon Haskett downgraded the stock, citing a disappointing earnings result on Thursday and labor cost headwinds ahead.
Equity analyst Chuck Grom said he left the earnings call with more questions than answers and was particularly concerned about the need for the retailer to wrack up labor costs to compete with Dollar Tree (DLTR). In fact, he cautioned clients that the $100M in wage investments outlined in the earnings release may be overly conservative. 
Additionally, Walmartâs moves to cut costs could have a âripple effectâ on Dollar General. The actions could also curb a trade-down impact that many expect to lift sales for discounters in 2023 as their core customers âremain under duressâ into the start of the year.
Finally, former Dollar General (NYSE:DG) CEO Rick Dreiling was named CEO at Dollar Tree (DLTR) in January. Grom indicated his stewardship could make the key rival a âmore formidable competitor going forwardâ in 2023 and beyond.
âTaking all of these points together, we think the case for both material EPS upside and a higher multiple is in doubt,â Grom concluded. âWe are therefore downgrading shares of DG to Hold-Rated.â
He assigned a $220 price target to the stock alongside the downgrade, modestly above Fridayâs trading range. Shares of Dollar General (DG) slid 1.75% in the waning hours of the weekâs trading, extending a year to date decline to about 16%.
On the other hand, Seeking Alpha contributor DM Martins Research argued that the post-earnings pullback has created a buying opportunity. Read more on his conversely bullish perspective.