Dollar General (DG) saw its shares fall by almost 18 percent on Thursday after it slashed its annual outlook for the second time. The second quarter results also fell short of the expectations of Wall Street analysts. Reasons for the weak results of the discount retailer included a shift towards lower margin goods by customers as well as lower customer traffic.
According to Refinitiv data, analysts had estimated a 1.08 percent rise in same-store sales but Dollar General reported a fall of 0.1 percent of comparable sales. Analysts had predicted a $2.46 adjusted earnings per share while the retailer announced earnings of $2.13 per share adjusted. Dollar General posted a revenue of $9.8 billion while analysts had estimated a revenue of $9.9 billion.
Dollar General also lowered its outlook. Its new guidance mentions sales to grow by 1.3 percent to 3.3 percent. This is lower than its prior guidance of 3.5 percent to 5 percent sales growth.
Dollar General also changed its outlook of same-store sales to about 1 percent, and its earlier outlook was a growth of 1 percent to 2 percent.
Dollar General CEO said that its plans of spending additional amounts on labor as well as accelerating inventory reduction efforts had contributed to about $170 million loss in the second half of 2023 according to a statement by Dollar General CEO Jeff Owens.
In the statement Owens also said that those investments had pressured 2023 results but would “further strengthen” the company’s foundation as it moves into 2024 as it would drive “sustainable growth” and create “long-term shareholder value.”
Dollar General said that its plans to open roughly 1000 stores in 2023 remain. The discount retailer already has more than 19.000 stores across the nation as of now.
The Goodlettsville Tennessee based retailer has faced many of the same problems that its competitors including Dollar Tree, Walmart and others retailers have faced. They include an increase in shrink and lower traffic. Shrink is the retail term for losses due to theft, burglary and return of goods.
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