Dollar General is in a ‘really bad situation,’ and investors should stay away, Jim Cramer says

The circumstances around JPMorgan’s downgrade of Dollar General (DG) appear “highly unusual,” CNBC’s Jim Cramer said Wednesday, suggesting investors should heed the firm’s call and stay clear of the retailer’s stock.

JPMorgan on Wednesday lowered its rating on Dollar General to the equivalent of a sell, from hold, and cut its price target to $116 per share, from $132. The downgrade from veteran retail analyst Matthew Boss followed a meeting with Dollar General’s CFO that painted a challenging financial picture of the company’s core low-end consumer. 

“They had a fireside chat. They went from hold to sell. Highly unusual,” Cramer said on “Squawk on the Street.” He added later, “I would not own this.” 

Cramer said Dollar General’s customer base “is just really, really hurting,” due in large part from the effects of long-lasting inflation. And now, Dollar General management expects the resumption of student-loan repayments and higher fuel prices to further strain consumer savings, JPMorgan noted.

Shares of Dollar General fell nearly 2% Wednesday, to under $113 each, extending their year-to-date declines to more than 53%.

 “This is a really bad situation,” Cramer said.

Within the retail sector, Cramer’s Charitable Trust, the portfolio used by the CNBC Investing, owns the likes of TJX Companies (TJX) and Costco Wholesale (COST). It also owns a small position in Foot Locker (FL) as a potential turnaround play.