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Why Dollar General's Stock Surged 16% in April

By Rich Duprey – May 6, 2020 at 2:29PM

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The discount retailer has become a vital outlet for consumers during the pandemic.

What happened

Shares of Dollar General (DG 3.00%) jumped 16.1% in April, according to data from S&P Global Market Intelligence. This isn't a surprising outcome considering the depressed economic condition resulting from the coronavirus pandemic.

So what

With businesses ordered closed, employees furloughed, and stay-at-home orders issued, consumers will spend their limited dollars in ways that stretch them the furthest.

Dollar General store interior

Image source: Dollar General.

Dollar General is the leading dollar-store chain and possesses a strong market position, as it offers consumers a broad range of goods and varying price points, with most of them being $5 or less.

As unemployment hit 30 million people -- and ADP just reported that private payrolls plunged to their lowest levels since it began tracking them -- the dollar-store chain became a key value component for consumers. They were also able to make their $1,200 stimulus checks go a lot further at the chain that also increasingly sells fresh produce in a challenge to Walmart's dominance.

Now what

Dollar General posted its 30th consecutive year of comparable-store sales growth in 2019, and the growth trajectory it's on remains intact. 

Shares of the leading dollar-store chain gained more than 40% over the past year, despite the highly competitive nature of the discount-retail market. Investors are likely to see similar resilience this year.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Dollar General Corporation Stock Quote
Dollar General Corporation
DG
$246.48 (3.00%) $7.17
Walmart Stock Quote
Walmart
WMT
$132.53 (2.18%) $2.83
Automatic Data Processing, Inc. Stock Quote
Automatic Data Processing, Inc.
ADP
$232.25 (2.68%) $6.06

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