Dollar General Shares Plummet

By Anuja Bharat Mistry and Aishwarya Venugopal

(Reuters) – Dollar General’s shares slumped 29% to a more-than-six-year low on Thursday after the discount retailer slashed its annual sales and profit forecasts, as competition for budget-conscious shoppers intensifies in the U.S.

Dollar stores have come under pressure as deep-pocketed rivals such as Walmart (NYSE:WMT) and Target have emphasized low-priced daily essentials. Additionally, the rise of Temu, China’s PDD Holdings’ e-commerce platform, has also weighed on the business.

“(Dollar General (NYSE:DG)’s results) show the challenge of maintaining market share with Walmart winning in a slower growth environment,” said Evercore ISI analyst Michael Montani.

Dollar General’s core customers, comprising households earning less than $35,000 annually, account for about 60% of overall sales.

“While middle and higher-income households are seeking value as well, they don’t claim to feel the same level of pressure as low-income households, as customers have felt more pressure on their spending,” said CEO Todd Vasos during a post-earnings call.

Dollar General now expects fiscal 2024 same-store sales to rise 1% to 1.6%, down from a prior forecast of 2% to 2.7%. Annual earnings per share are projected at $5.50 to $6.20, compared to an earlier forecast of $6.80 to $7.55.

“Dollar store operators are clearly struggling in the current macroeconomic environment … To regain foot traffic, Dollar General will likely need to cut prices and increase promotions,” stated Arun Sundaram, an analyst with CFRA Research.

Dollar General’s shares hit their lowest since June 2018 at $88.20, heading for their worst day on record. Rival Dollar Tree (NASDAQ:DLTR) also saw its stock dip about 9%.

The company’s margins fell to 30% in the second quarter, down from 31.1% a year earlier due to increased markdowns, inventory damages, and retail shrink, which includes losses from theft or damage. Executives noted that increased promotional activity will pressure sales and margins for the remainder of the year.

In its latest report, the company posted net sales of $10.21 billion for the three months ended August 2, falling short of analysts’ average estimate of $10.37 billion. Its profit of $1.70 per share also missed estimates of $1.79.