By Jacob Sonenshine
The market jeered at news that Dollar General has a new CEO. It should come to appreciate him in time as the company is on a good course, with its shares undervalued at current prices.
Jerry Fleeman will officially take the helm Jan. 1, 2027, the company said Tuesday morning. The stock promptly dropped 5.8%.
It's the latest in a string of scary headlines for the company. Shares are now 24% below their pre-Iran conflict levels. The longstanding concern for dollar stores is that during inflationary events stores can't raise prices enough to keep profit margins from shrinking.
Those concerns are shortsighted and the selloff presents an opportunity for investors. Dollar General is growing margins as it modernizes its approach to courting consumers, something that can help it sustain healthy profit growth. It even stands to benefit if consumers retrench.
The market's rude reception to the announcement probably says more about outgoing CEO, Todd Vasos than it does Fleeman. Vasos stepped in at the end of 2023 to pilot a turnaround for the business, which sparked a return to earnings growth last year. Stock price appreciation soon followed as Dollar General advanced 50% from the time Vasos took over through the eve of the Iran war on Feb. 27, and has performed well since we recommended it early last year.
Fleeman takes over a business with momentum. Same-store-sales growth reaccelerated to almost 3% for 2025 through store remodels and digital partnerships for customer orders. Management boosted its 2025 gross margin back to historically normal levels through mild price increases, and produced 12% earnings per share growth.
Fleeman, for his part, has decades of consumer retail experience. Fleeman, 52, has been CEO of Ahold Delhaize USA. Part of a Dutch-Belgian retail giant, Ahold operates Stop & Shop and other stores. The parent company's stock is up 65% in the past five years.
"We are optimistic about the appointment of Mr. Fleeman," writes Telsey Advisory Group analyst Joe Feldman, who likes "Mr. Fleeman's deep understanding of the U.S. consumer and competition, as well as his experience leading teams across core retail strategy, operations, marketing, merchandising, and digital."
These initiatives can drive continued growth. On this month's fourth quarter earnings release, management guided for 2.45% same-store-sales growth this year, only a hair under the 2.5% analysts had expected. Not to worry: in the past six quarters, management kept guidance largely steady -- and then beat comparable sales growth expectations by about a half a percentage point on average.
The company said it has recently taken some market share in certain categories, namely longer-lasting, larger household items, partly because of stores' "value and convenience." Relatedly, the company has lifted prices, but not more than most consumer products across the economy -- so it has maintained its crucial status as shoppers' "value" destination. Such status could come in handy if consumers tighten their budgets on the back of broader inflation and higher interest rates.
The point: Dollar General appears ready to generate sales and earnings that satisfy or surpass expectations, even if consumer spending were to slow under the premise that shoppers would become more bargain conscious. That would translate into more than the 8.8% annual earnings per share growth analysts currently forecast for the coming three years, according to FactSet.
That growth can drive shares by even more over the coming year or so, given that it would boost the valuation. When the market is fully confident in the business, it has bid the stock up to a peak in recent years -- even earlier this year -- of about 21 times forward earnings, versus its current just over 16. That's not even asking for so much, given the peak multiple is roughly in line with the S&P 500.
The main risk is that analysts are too optimistic about price increases and higher gross margins. We see it more likely that analyst forecasts are realistic, given the company's recent execution. The turnaround engineered by Vasos has changed the story for Dollar General. Investors would be wise to use this opportunity to pick up shares at discounted prices.
This will be a dollar well invested.
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Jacob Sonenshine is a stock picks writer at Barron's Investor Circle and regular contributor to The Trader Column. His general focus is technology, consumer, industrial, and healthcare.
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March 27, 2026 21:31 ET (01:31 GMT)
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