Dollar General, Target stocks downgraded amid fears of a consumer slowdown

Dollar General and Target shares are trading lower Monday morning as analysts downgraded the retail stocks, citing economic headwinds and fears of consumer of a slowdown in consumer spending. Yahoo Finance Live's Julie Hyman and Brad Smith break down what analysts are saying.

Video transcript

- We're also watching shares of some of the big retailers today. Analysts losing faith in two of those retailers for certain. Morgan Stanley, the latest firm to downgrade Dollar General after the discount retailer reported disappointing earnings and cut its full-year outlook on Thursday. Piper Sandler, Oppenheimer, and Atlantic equities, all downgraded the stock last week as well.

Shares moving lower there by one and a half for Dollar General. Meanwhile, Target also got a cut today from KeyBank. The firm, worrying that student loan repayments will hurt margins. That is something similar to what we had heard from JP Morgan last week, around Target as well or target.

However, you're pronouncing them at home. They're saying that given the recent sell-offs, they believe that the downside may be limited. But they see growing risk of student loan payments as likely pushing out the margin recovery story at least another year. Plus them pushing for this downgrade as well on the day hurting the stock.

- That's really interesting. I wonder how you figure out of Target customers, how many have a certain debt load from student debt and how that affects their student-- their spending patterns.

- At Target, specifically.

- Right. I mean, why Target and not some of the other retailers coming out?

- Why not Nordstrom? Or why not one of the more expensive ones out there?

- I don't know. Maybe there's a cohort of-- an age cohort that has the highest level of debt and maybe they shop at Target.

- I mean, it could also be-- and we saw even within some of the recent retail sales data, more of that push for digital comparison shopping as well. That was one of the themes that started to reemerge. And in the events of economic downturns past, we've seen consumers typically, look for more of that comparison shopping to try and hedge how much they might be spending on even discretionary items.

And so for Target. Yeah, they've spent a lot on their e-commerce strategies. It was a weak spot though in this most recent quarter though, so perhaps, that's something that they read through and said, yeah, they're not as best positioned on the e-commerce front.

- Interesting. I think we're going to be talking a lot more about the student debt story though and all of the unforeseen repercussions.