Pressured Consumer Pinches Dollar General's Near-Term Prospects; Full Margin Recovery Still Likely

Despite intensifying competition that we believe is diminishing its competitive edge, Dollar General's advantageously located store network, low-priced items, and scalable supply and distribution capabilities should allow it to continue to create economic value. With a footprint focused on thinly populated areas that cannot support numerous retailers, and with small basket sizes (over 80% of items are priced at or below $5) that blunt pressure from e-commerce competitors, we expect Dollar General to effectively deliver the convenience and affordability that its generally modest-income (roughly $40,000 annually, as a household) customers demand.