Dollar General late Thursday said it tapped former CEO Todd Vasos to help it navigate through its current downturn. Dollar General stock soared Friday on the news and updated guidance. However, analysts warned investors not to expect a quick operational turnaround.
The discount retailer appointed Vasos, a current board member, to return as CEO for the "foreseeable future," according to a Thursday release. Vasos previously served as Dollar General CEO from June 2015 to November 2022 before stepping into a senior advisory role and retiring in April 2023.
Vasos replaces his successor Jeff Owen, who served as chief executive officer for less than a year. Owen separated from the company and resigned from the board of directors, effective Thursday.
"At this time the board has determined that a change in leadership is necessary to restore stability and confidence in the company moving forward," said Michael Calbert, chairman of the board.
During Vasos' seven-year stint as CEO, Dollar General added 7,000 stores, nearly 60,000 net new jobs, increased annual revenue by more than 80% and more than doubled its market capitalization.
Vasos is "acutely aware of the challenges facing our business and the industry more broadly," said Calbert.
Dollar General Guidance
Dollar General updated its fiscal 2023 outlook following the executive change. The company narrowed its net sales guidance to range from 1.5% to 2.5% growth, compared to its previous estimates of 1.3% to 3.3% growth.
Dollar General lowered its earnings guidance to between $7.10 to $7.60 per share vs. prior expectations between $7.10 and $8.30 per share.
The retailer sees same-store sales growth flat to down 1%. It previously expected comparable sales ranging from a 1% decline to 1% growth.
Dollar General missed earnings expectations the past two quarters, reporting a 28.5% drop to $2.13 per share for its Q2 results at the end of August.
Analyst Reactions
Piper Sandler wrote the return of Vasos as CEO is good news for Dollar General, but it isn't a quick fix for a company that appears to be facing a range of issues, according to Friday commentary from The Fly. Dollar General's problems do seem fixable, and Vasos' leadership should boost confidence for employees and investors. However, a meaningful turnaround likely requires more investment in labor and reassessing growth initiatives, the firm wrote. Piper Sandler lowered its price target on DG stock to 114 from 144 and maintained a neutral rating.
The management change "offers new glimmers of hope after a messy run," Barclays analyst Seth Sigman wrote Friday, "but is also concerning as it implies so much has changed in such a short period of time." He likes Dollar General's sense of urgency but is not as sure on the path forward, such as steps to improve execution and where earnings settle. Sigmon lowered his price target to 124 from 128 and kept an equal weight rating on shares.
DG Stock
Dollar General leapt nearly 9.2% Friday on the news.
DG stock has skidded lower for 10 straight weeks. Shares are down nearly 55% for the year through Friday's close, and trading near their lowest levels since Dec. 2018.
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