Dollar Tree (DLTR) and Dollar General (DG) report earnings this week after massive selloffs last quarter. Both stocks are down ~45% YTD, underperforming the staples sector, which is up 15%. Short interest remains high in DLTR, and DG shows recovery. With options pricing 8%-10% moves, volatility is expected.

• Dollar Tree and Dollar General (DLTR and DG) both had huge moves on earnings last quarter, 32% and 23% down. They report 12/4 and 12/5.

• These are much larger than the average moves of 6% and 7%. The expected moves in the option market are 8% and 10%, not the repetition of the huge move.

• The stocks are both down 45% YTD. Both sold off because of the election and tariff fears as they import their merchandise.

• The sector they are in, staples, is up for the year 15%. Only Estee Lauder (EL) and Walgreens (WBA) have performed worse.

• Also in the sector reporting this week is Hormel (HRL) 12/4 Campbells (CPB) 12/4, Brown-Forman (BF/B) 12/5 Kroger (KR) 12/5

• In DLTR, the short position rose to a high and stayed there after the earnings negative surprise. In DG, the short position has recovered

• The graph shows that short interest is at a minimum, reflecting a more bullish sentiment. Historically, a drop in short interest during earnings weeks has correlated with a rising stock price.

Dollar Tree

Dollar General

• DG the short position is above average.

• BFB is down for the year and the short position is at a high.

• KR is up and the short position is down.

BFB

Kroger

• In the XLP the stock position and the index has both risen recently in what is a reversal strategy. This pattern is also shown in HD.

• In all these cases we see shorting on the way up and covering on the way down. This is a value or reversal strategy

Dollar Tree and Dollar General face earnings amidst YTD declines and elevated short interest. With options pricing higher-than-average moves, volatility is anticipated. Investors should watch for patterns in short-covering strategies and tariff impacts across staples as volatility increases sector-wide.

Want to know more?

Access this data in real time using S3’s BLACK APP or Contact us to get started.