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Retail

Dollar General Cuts Annual Outlook As Shoppers Curb Spending

By Reuters
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Dollar General Cuts Annual Outlook As Shoppers Curb Spending

Dollar General cut its sales and profit forecasts for the year on Thursday as Americans, pinched by higher prices, shopped more for essentials and pared back purchases in categories including home goods and clothes, leading its shares down 14%.

The discount store chain saw traffic to its stores decline during the quarter as its low- to mid-income customer base cut back on purchases of seasonal goods, clothing and houseware - a challenging trend seen across retailers.

Stiff Competition

Low-cost retailers like Dollar General face stiff competition from bigger retailers like Walmart in the grocery and food business, which has lifted its annual outlook as it offers lower prices on groceries compared to rivals Target.

Edward Jones analyst Brian Yarbrough said shoppers were likely making trips to Walmart to refill their household staples, with fewer trips to Dollar General stores.

"The health of the lower-income consumer is clearly in question as inflationary pressures continue to take a toll on spending," said Arun Sundaram, equity analyst at CFRA Research.

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Gloomy Outlook

The Tennessee-based company's gloomy outlook echoes disappointing results at its biggest rival Dollar Tree last week, which took a hit from slowing demand for non-essentials and elevated cost pressures.

Dollar General now expects fiscal 2023 same-store sales to rise between 1% and 2%, compared with its prior outlook of an increase of 3% to 3.5%.

It now forecasts earnings per share to range from being flat to declining 8% year over year, down from a prior forecast of an about 4% to 6% rise.

'Near-Term Pressure'

Its 1.6% rise in quarterly same-store sales was below analysts' average estimate of a 4.07% rise, according to Refinitiv data.

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Higher inventory shrink and a challenging near-term economy plagued Dollar General's first-quarter results, with CEO Jeff Owen warning "near-term pressure" would impact its full-year sales and profit.

News by Reuters, edited by ESM – your source for the latest retail news. Click subscribe to sign up to ESM: European Supermarket Magazine.

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