Dollar General Paints Grim Picture of Budget Shoppers
Economy´s tanking
Dollar General Paints Grim Picture of Budget Shoppers
by Jonathan Roeder and Jaewon Kang
(Bloomberg) -- Dollar General Inc. shares plummeted the most on record after the discount retailer reduced its full-year sales forecast. Its chief executive officer said customers are cutting back on essential goods after years of rising costs for other expenditures such as rent and health care.
“Inflation has continued to negatively impact these households, with more than 60% claiming they have had to sacrifice on purchasing basic necessities,” CEO Todd Vasos said on a call with analysts.
Comparable sales will rise 1% to 1.6% for the year, the company said Thursday, down from the previous outlook for a 2% to 2.7% increase. Dollar General also cut its 2024 profit view.
The stock tumbled 32% on Thursday, the biggest drop since Dollar General went public in 2009. The decline adds to a nearly 9% decrease this year through Wednesday. Shares of competitor Dollar Tree Inc., which reports earnings next week, fell 10%.
Dollar General Stock Hit Again by Weak Results | The shares have steadily declined over recent quarters© Bloomberg LP
The results cast doubt on the turnaround being led by Vasos, who returned to the company last year, and the health of some US shoppers. Dollar General, which operates more than 20,000 stores, caters to Americans in the lowest rung of the income ladder, with its core customer making less than $35,000 a year. Other discount chains, including Ollie’s Bargain Outlet Holdings and Big Lots Inc., have also posted disappointing results.
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Dollar General and other discounters typically perform well during challenging economic periods when consumers look to stretch their budgets. As the economy has oscillated between growth and recession fears, the company has struggled to fend off competition from retailers that have been cutting prices and offering deals.
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Vasos acknowledged that Walmart Inc., the largest US retailer, has been “doing a pretty nice job” in winning shoppers from other chains who are looking for deals after several years of high inflation boosted price tags across the consumer economy. Walmart breezed to another quarter of sales growth, topping Wall Street expectations.
Target Corp. and Best Buy Co., which cater to consumers with higher incomes than Dollar General, also posted solid results and impressed investors. Chains have said shoppers are prioritizing essentials, and buying new, trendy products when they’re affordable, but they’re being selective and remain on the sidelines for larger purchases and projects.