We have always found it odd that both Dollar General and Dollar Tree report earnings on the same day and at the same time. It is almost like they are the same company; well, they basically are. Tomorrow, August 25th, 2016, before the market open, both DG and DLTR will report second quarter earnings. When looking at Google Trends both look quite promising.
In the month of July, Dollar General saw a 31.57% increase in searches vs the previous year while Dollar Tree saw a 20.5% increase. From strictly a Google search standpoint, Dollar General looks stronger in this quarter. From a technical standpoint, Dollar Tree looks stronger. Dollar Tree broke out of a 12 month range with a great Q1 earnings report in June of 2016. You can also see that Dollar Tree is sitting right at its 50 day moving average before the earnings report tomorrow.
When we look at the Dollar General chart, it is clear there has been a break down through the 50 day moving average. That said, the new uptrend line that started at the November 2015 bottom is being held. Also note that the uptrend line for Dollar General is much steeper than that of Dollar Tree. If earnings are strong look for Dollar General to reach $100 rather quickly. If earnings are lackluster, we could see the stock move lower and reach support at the 200 day moving average around $81 a share.
It is very unlikely that we will see one company report a huge quarter and one report a terrible quarter. It just doesn’t happen. They are in the same industry and their profits move in tandem. If you are looking to invest in a “dollar store” we would suggest Dollar General, but wait until after the earnings report tomorrow morning.