Dollar General’s Disappointing Outlook
Dollar General Corp. recently announced a disappointing outlook for the rest of the year, sending its shares tumbling. The discount retailer reported a drop in sales and profits for the second quarter of 2023, and cut its outlook for the year.
The company, which operates more than 16,000 stores in the U.S., said sales at stores open at least a year fell 1.3 percent in the quarter ended August 3. That was the first decline in same-store sales since the fourth quarter of 2018.
The company also reported a drop in profits, with net income falling to $338.2 million, or $1.19 per share, from $370.2 million, or $1.30 per share, a year earlier. Analysts had expected earnings of $1.25 per share.
The Impact of Tariffs
The company attributed the weak results to the impact of tariffs on imported goods. Dollar General said it had to raise prices on some items to offset the higher costs of imported goods, which hurt sales.
The company also said it was facing higher costs for freight and labor, which also weighed on profits.
The weak results and outlook sent the company’s shares tumbling. The stock was down more than 10 percent in pre-market trading on August 31.
Cutting the Outlook
Dollar General cut its outlook for the year, saying it now expects same-store sales to be flat to up 1 percent, compared to its previous forecast of a 1 percent to 2 percent increase.
The company also said it now expects earnings per share to be in the range of $5.90 to $6.10, down from its previous forecast of $6.20 to $6.40.
The company said it was taking steps to improve its performance, including expanding its private-label offerings and investing in technology to improve the customer experience.
Competition from Online Retailers
Dollar General is facing increasing competition from online retailers, which are taking market share from traditional brick-and-mortar stores. The company is also facing pressure from other discount retailers, such as Walmart and Target, which are expanding their own discount offerings.
The company is also facing higher costs for freight and labor, which are putting pressure on profits.
Investor Reaction
The weak results and outlook sent the company’s shares tumbling. The stock was down more than 10 percent in pre-market trading on August 31.
Analysts said the weak results and outlook were disappointing, but noted that the company was taking steps to improve its performance.
“We believe the company is taking the right steps to improve its performance, but it will take time for these initiatives to bear fruit,” said analyst David Schick of Stifel.
Looking Ahead
Dollar General is facing a challenging environment, with competition from online retailers and other discount stores. The company is taking steps to improve its performance, but it will take time for these initiatives to bear fruit.
In the meantime, the company is facing higher costs for freight and labor, which are putting pressure on profits. Investors will be watching to see if the company can turn things around in the coming quarters.