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Why Dollar General's Stock Surged 16% in April

What happened

Shares of Dollar General (NYSE: DG) 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.

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.

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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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