NEW YORK (TheStreet) -- Dollar General's (DG) coverage was initiated with a "hold" rating by analysts at Jefferies on Thursday. The firm set a price target of $56 for the company.
The discount retailer was down 0.2% to $57.13 in early market trading today.
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Jefferies said increased competition was the reason for the rating.
"Increasing competition from Walmart in small format discount retail, softer SSS, less visibility on the next comp driver beyond tobacco, declining gross margin and SG&A deleveraging this year. If SSS don't improve much beyond 3%, we think it could be hard to justify 6-7% sq. ft. growth in years forward," Jefferies said.
"Management has exploited many opportunities in recent years, but as competition increases, small unit growth accelerates and traffic moderates, EPS upside and multiple expansion could be limited," the firm added.
TheStreet Ratings team rates DOLLAR GENERAL CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate DOLLAR GENERAL CORP (DG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, growth in earnings per share and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins."