Aquí se habla acerca de DGTR y DG (grandes almacenes de rebajas). Es interesante porque primero habla Ted y luego Chowder.
"Ready for this morning’s case study? Let’s take a look at Dollar Tree (DLTR). I owned it for one (profitable) month in 2012, at which point I decided it wasn’t my cup of tea. I also owned competitor Dollar General (DG) from 9/16 through 5/17, also minimally profitable. As I’ve said before, I’m not a big fan of retail, and the closest I’ve come to a LT position in a retail stock is CVS. (Definitely a LT position, but only half retail.) So take that with a grain of salt? Other people are very happy in the sector, and can invest with confidence, but I have never found it attractive for more than a short-term trade.
Chowder has often talked about the defensive nature of “dollar stores”, and he has a point. They are discounters, attractive to those on a tight budget, and thus strongly recession resistant. The upscale retailers will lose business when money is tight, but the discounters may actually see increased traffic.
I believe Chowder owns DG in some/many of his portfolios. DG has traditionally been the biggest of the dollar chains, though its credit rating has often been subpar. It did not reach investment grade credit (Baa3) until 2013, and even today is at a very marginal Baa2, just two steps above junk grade. The stock has generally done well, though, with five-year gains of 84% (plus a small dividend) vs. 53% for SPY. Not exactly knock-your-socks-off performance, but its business has been healthy.
Dollar Tree was always smaller. Their own path to growth was far more conservative, with minimal debt. In fact their “current assets” (essentially cash and inventory) exceeded their TOTAL liabilities through January 2015. I don’t believe they even HAD a credit rating, as there is no point in that exercise when you are using so little credit. Still, the results were there. For the five years from 7/1/10 to 7/1/15, DLTR was up 244% vs. 175% for DG and 79% for the S&P500. The credit discipline forced them to practice “smart growth”, in my opinion.
The picture changed in 2015, when Dollar Tree acquired Family Dollar in a $9B deal. (I believe Chowder talked about this deal, though I’m not sure whether he liked it or not.) Moodys immediately initiated a Ba3 (three steps into the junk range) credit rating on the debt issue that DLTR floated to fund the acquisition. Still, that immediately brought their store count up to that of Dollar General. An aggressive move, but “smart debt”?
In fact it hasn’t worked out so well for them, to the extent that Family Dollar was recently termed a $9B “albatross” for Dollar Tree. While the Dollar Tree stores continue to perform respectably well, Family Dollar performance is lagging badly. Nor has the acquisition been positive for the stock. Since the acquisition closed in July 2015, DG had gained 40%. The S&P500 has gained 33%. DLTR is up just 8%, and does not even pay a dividend!
A “shopping experience” comparison of DG vs. DLTR suggested that they have taken a different strategy, with DG positioning itself somewhere between convenience stores and Walmart in the shopping hierarchy, a smaller footprint appropriate to smaller communities (if not a full-service supermarket). DLTR appears to have positioned itself as a “cheap junk” outlet, with empty shelves, trash left in the aisles, and a generally shoddy feel. But possibly a good place to get a bargain on seasonal merchandise? That difference surely plays into the operational performance of the two chains, though it is harder to say how the Family Dollar acquisition might have impacted that picture?
DLTR may be pulling out of this? Their revenue was up 50% from 2016 to 2018. Their operating income doubled. Just as important, their LT liabilities have dropped by a third! They were upgraded to Baa3 credit in March, and thus are out of the “junk debt” range after just three years. If they show even a little operational strength, they should be poised for another upgrade soon. Retail businesses generate fat cash flow – albeit also with ongoing capex. On a TTM basis they have $2.6B of EBITDA, $2.0B of OCF, $1.2B of FCF. Their current LT debt of $5.0B ought to be manageable on those numbers (their other liabilities, largely accounts payable and deferred liabilities that are carried interest-free, are exceeded by current assets).
Now that they have gotten the debt under control, perhaps they can return their focus to operating and growing their business? Cash flow is the lifeblood of companies, and when you suck so much of it off into debt service, then other aspects of the business can grow anemic. My guess is that this is what has hurt them over the last few years – they bought their growth, but at the cost of deteriorating quality and customer experience. Now they have to fight to regain that ground.
In conclusion, I do not either recommend or caution against DLTR. They do not meet my investment criteria, due to credit quality and my dislike of retail. Nonetheless, they are inarguably cheap on a P/E basis, both compared to the broader market and compared to their closest competitor, DG. Debt-funded acquisitions are not free, and the cost is often paid in the years immediately following the acquisition, however we are getting far enough away from this acquisition that the debt pressure should be easing. It is at least worth a careful look if you are interested in owning that segment."
"While you and others focus on the numbers, the numbers are always changing. I’m focused on the story.
Dollar General is the largest discount retailer in the US by number of stores with over 14,600 neighborhood stores in 44 states. It provides products that are frequently used and replenished such as food, snacks, and health and beauty aids. The company helps shoppers: ‘Save time, Save money, Every day.’
Dollar General expects to grow annual net sales to $30 billion by 2020, which would represent a 50% increase over 2015 levels and 7%-10% annual net sales growth.
Dollar General has put up 28 consecutive years of same-store sales growth as of 2017. The firm continues to add new stores to its portfolio and plans to add as many as 900 in 2018 in addition to the remodeling of 1,000 stores and 100 relocations. The company lost the battle for Family Dollar’s assets to Dollar Tree, despite a higher offer. It may have been a blessing in disguise.
Dollar General sees the opportunity for an additional 13,000 locations across the US, many of which will be developed as small format stores with less than 6,000 square feet. These small format stores enable the firm to optimize merchandise mixes in each store and reduce occupancy costs. Such growth initiatives are expected to help drive its 2020 sales goal.
>> Dollar General has put up 28 consecutive years of same-store sales growth as of 2017. <<<
Are you kidding me? 28 consecutive years! That's an Aristocrat of same-store sales growth. ... I'm sticking with the story. With those growth numbers I expect them to be able to handle the debt and grow the dividend.
Expected earnings growth at 16.9% at FAST Graphs? This is a growth company.
For you total return people, my son’s first position in DG was on 11/16/15 and is up 83.17%. … I wish all of our positions were performing as well.
His second purchase was on 12/03/15 and is up 61.47%. … The total position is up 71.19%.
I’ll stay focused on the story, the story isn’t changing, the numbers will"