Let's say you wanted to create a stock that fits the zeitgeist right now. One that would be loved by investors everywhere because it's incredibly well-run and has just delivered a gigantic upside surprise.
That company would be Dollar General (DG) with a stock that's up 7% just today to an all-time high of $126 after it put up remarkable numbers.
Close observers of these columns know that I have always been a big fan of the dollar stores and I think they offer tremendous bargains for hard-working people, not to mention having killer candy aisles.
But the fretters on Wall Street - which is pretty much everyone - have been petrified that Dollar General and its doppelganger Dollar Tree (DLTR) would be crushed because so much of their merchandise is sourced in China. How can you maintain the dollar price point and not be totally dependent upon China?
You source elsewhere, that's how. You don't succumb to being dependent on one country and when the president tells you a year ago that he doesn't like the way the Chinese trade you get aggressive about sourcing, which is how Dollar General has an astoundingly low 6% of its merchandise made in the People's Republic. This is not an easy task. Dollar General has more than 15,000 stores. It's a behemoth.
But it is nimble and the company, like Cisco (CSCO) , saw this coming and decided to take action before it got bushwhacked like so many other retailers, especially the department stores which have been shredded often because they are stuck and haven't been able to wean themselves off the opium or even quantify the damage. They seem like a deer in the headlights
Dollar General has one ethos: keep prices low for its consumers because the consumers always need a break. Listen to what Todd Vasos, the visionary CEO of Dollar General, had to say about its customer: "When you look at our gains our core consumer is continuing to tell us I feel pressure. But again, this core consumer always is under pressure financially. Her income levels are on the lower end as we all know. "
But the story's a positive one. "She continues to tell us that she's back to work. She continues to tell us that she got a little bit more money in her pocket more so from productivity meaning working more hours than actual wage growth but yes, more money."
The huge upside surprise, a 3.8% comparable store figure versus 2.7% consensus, came because of both higher prices and more traffic, which means taking share.
I always tell you that Wall Street's filled with snobs who don't bother to go to the downscale places and instead spend a lot of time reading about them. While I do prefer Dollar Tree to Dollar General, and Dollar Tree had a strong quarter today, too, I think we got a blueprint today from this company about how to deal with tariffs which I do expect will be expanded to include the last of the $300 billion in imports, although I expect those won't happen for another six months, and when they do I think they will start at 10% not 25%.
But make no mistake about it, the companies that listen to the president, the companies that don't have their heads in the non-geopolitical sands, have given their investors unbelievable bounty, with Dollar General being the best I've seen in the entire market. Six percent China for a dollar store, who'd a thunk it?