Piper Sandler analysts downgraded Dollar General (NYSE:DG) to Neutral from Overweight, lowering the price target to $178 from $275 per share.
They told investors in a note that the firm "cannot recommend what we can't fully explain."
"After maintaining an OW rating on DG shares for >10 years, we are downgrading shares to Neutral on somewhat inexplicable sales/comp weakness, lack of conviction for a near-term rebound, and concerns that guidance wasn't reduced enough," they explained.
"The comp step-down Q/Q from Q4 to Q1 of 400 bps is somewhat unprecedented (ex. COVID) - and DG has now missed 3 quarters in a row."
The analysts noted that while DG highlighted well-known macro headwinds, the firm cannot explain why the company is seeing more material impact compared to other retailers serving lower-income customers.
"DG is starting to make price and labor investments, but we suspect it is early in this journey which places risk to the reduced 2023 EPS guidance. Finally, for our new PT of $178 (17x 2024E EPS) we reduce our multiple assumption from 22x to 17x due to a reduced EPS outlook," concluded the analysts.