Buy this beaten-down discount retailer after a major leadership change, Gordon Haskett says

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Dollar General ‘s latest leadership change could help re-stabilize the company and put it on track toward growth again, according to research firm Gordon Haskett. Analyst Chuck Grom upgraded shares to buy from hold in a Friday note. He also established a price target to $140, which implies shares could rally 37% over the next 12 months. Following Thursday’s close, Dollar General announced former CEO Todd Vasos would be returning and replacing Jeff Owen as chief executive, effective immediately. Owen had been in the role for less than a year, during which the company has experienced a slowdown in sales growth and criticism over worker safety issues. The stock jumped more than 7% Friday during premarket trading. Nonetheless, shares remain down more than 58% for the year. DG YTD mountain Tough year for DG To be sure, Grom noted that ousted CEO Owen “is not entirely responsible for both the margin and comp issues over each of the past four quarters. … We think the company under-invested in both labor and price to protect earnings during the last year of Mr. Vasos’ tenure,” Grom noted, which he believes partially contributed to the company’s recent woes. “Bigger picture and regardless of how Dollar General arrived at this point, from this moment moving forward the return of Mr. Vasos has the potential to bring Dollar General Back to the Future,” Grom added. “We think building a position in DG at current levels now makes sense.” The analyst outlined a series of measures the company is likely to take to improve its margins and productivity. Vasos will likely accelerate the rollout of its demand forecast tool, the analyst said. On top of that, reducing the scope of district managers, adding incremental labor to stores and accelerating the produce rollout to drive traffic should help the company “right the ship.” “Favorably, the set-up for the low-income customer could begin to improve next year as long as unemployment holds in via lower food inflation, a more normal tax refund season next Spring, and the lap of SNAP reduction,” Grom said. “Taking these factors into consideration, we think Dollar General should undertake a significant margin re-set in 2024 to pave the way for a return to both comp and EBIT dollar growth in FY25 (and beyond). — CNBC’s Michael Bloom contributed to this report.