Jim Cramer Put These 14 Stocks Under the Microscope

7. Dollar General Corporation (NYSE:DG)

Number of Hedge Fund Holders: 55

Comparing the difference between Dollar General Corporation (NYSE:DG) and Dollar Tree, Cramer said:

“Discount retailers tend to do better when the consumers’ feeling stretched thin, and you know the consumer’s feeling that way. But Dollar General and Dollar Tree have behaved very differently after reporting earnings over the past couple days. When Dollar General announced its results yesterday and the numbers were excellent, the stock caught fire…

… The difference between these two comes down to what they had to say about their ability to control costs and offset the impact of, you bet, go ahead, the president’s tariffs… Unfortunately, we’re also in the middle of some volatile trade negotiations. President’s tariffs are potentially hurting their ability to keep prices low, and this is why Dollar General soared yesterday and Dollar Tree plummeted today, because Dollar Tree seems to have trouble, let’s say, more trouble with the tariffs.

At Dollar General, management remains confident they’ll be able to navigate these challenges by pulling a few levers, negotiating cost concessions with their vendors, shifting manufacturing to other countries when possible, or even just finding substitute products made in places where the tariffs are lower. While management’s confident this can work, they do expect the tariffs to result in some price increases as a last resort…

While both companies source some of their merchandise from overseas, especially from China, there’s a major difference in how much each company imports directly. See, Dollar General only imports 4% of its goods directly from foreign manufacturers. For Dollar Tree, it’s 40%…

… So let me give you the bottom line: While both these companies might have the word dollar in their names, the subtle differences in their supply chain structure are having a huge impact on their stocks. That’s why Dollar General soared yesterday, and Dollar Tree is now in the [house of pain]. And it’s why you should watch out for the distinction between direct imports and indirect imports in the rest of retail because going forward, it’s really going to matter.”

Dollar General (NYSE:DG) is a discount retailer that sells a broad mix of products. The company’s selection includes everyday consumables, packaged and perishable foods, health and beauty items, pet products, seasonal merchandise, home goods, and clothing for all age groups.