Dollar General beat estimates for first-quarter same-store sales and profit, as more Americans flocked to its stores for pocket-friendly groceries and essentials at a time when sticky inflation continues to pressure household budgets.
Dollar General has been focusing on selling relevant merchandise, having more employees at stores and expanding private-label brands, as it looks to attract consumers in the face of rising competition from rivals Walmart, Target and Chinese e-commerce platform Temu.
“These results were driven by strong customer traffic growth and market share gains during the quarter,” said CEO Todd Vasos.
Visits to Dollar General were up 12.6% year-over-year in the first quarter, while rival Dollar Tree saw a 12.4% rise, according to data analytics firm Placer.ai.
Robust quarterly results from bellwether Walmart earlier in May have indicated that US shoppers are still resilient, even as rival Target cautioned about shoppers delaying purchases and spending increasingly on out-of-home activities.
"These results were pretty consistent to what we've been seeing throughout the retail industry," said CFRA Research's Arun Sundaram.
First-Quarter Highlights
Dollar General's same-store sales rose 2.4% for the quarter, compared with analysts' average estimate of a 1.61% increase, according to LSEG data.
The company expects same-store sales for the second quarter to increase in the low 2% range versus analysts' expectation of 2.25% growth. It forecasts profit to be between $1.70 and $1.85 per share, compared with estimates of $1.92.
"Dollar General is still pretty early on its turnaround strategy ... it's going to take at least a few more quarters before we see strong top and bottom line growth," Sundaram said.
The discount retailer posted per-share profit of $1.65, compared with analysts' expectation of $1.57.
It reported gross profit as a percentage of net sales at 30.2%, down from 31.6% a year earlier, hurt by higher markdowns and an increase in retail shrink, where inventory is lost or damaged due to theft or breakage.
