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Dollar General shares fell after the company reported disappointing results.
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General dollar
The stock was in freefall after the discount retailer slashed its sales and profit outlook for the year, saying its core customer base was hurt by inflation.
The shares (ticker: DG) fell 20% to $161.37 on Thursday, pacing their biggest percentage decline since August 2016.
U.S. shoppers, especially low-income households, cut spending. High prices and expectations of a recession are putting pressure on excess savings, which have likely fallen from the $350 billion estimated by the Federal Reserve at the end of last year.
Jeffrey Owen, CEO of Dollar General, said “the macroeconomic environment has been more challenging than expected, particularly for our largest customer.”
The CEO also blamed lower tax refunds and bad weather in March and April for weak sales. “We believe our customers have been caught off guard by the reduction [tax] amounts, which exacerbated the inflationary pressures that were already under way,” he said.
The company’s first-quarter earnings of $2.34 per share were slightly below the $2.38 per share analysts expected. Revenue of $9.34 billion also narrowly missed estimates of $9.47 billion.
The retailer also noted an increase in shrinkage, an accounting term used to describe shoplifting or theft of any kind, among other issues that lead to less inventory than what was recorded. Rival
dollar tree
(DLTR) noted similar issues in its most recent results.
Given the challenges, the company said it expects earnings per share for the year ending January 2024 to be in the range of about an 8% decline flat from the previous year. That’s considerably lower than its previous forecast of 4% to 6% growth.
Dollar General sees same-store sales, a key metric for retailers that represents sales at stores open for at least 13 months, to increase 1% to 2% in fiscal 2023 compared to its earlier forecast for an increase of 3% to 3.5%. Analysts tracked by FactSet were looking for growth of 3.4%.
The retailer now expects to open around 90 stores in 2023 compared to its initial expectation of around 150 openings.
Still, CEO Owen said he was confident in Dollar General’s ability to generate strong growth in the years to come.
Judging by today’s stock drop, investors aren’t so sure.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com