Dollar General tops quarterly results as more shoppers turn to its stores

By Granth Vanaik

(Reuters) -Dollar General posted a smaller-than-expected drop in quarterly sales and beat profit estimates on Thursday, as more shoppers turned to its stores for cheaper groceries and other essentials amid sticky inflation pinching household budgets.

Shares of the company, down 45% so far this year, were up 4.4% at $139.78 after it also reaffirmed full-year sales and profit forecasts.

Dollar General, which in October re-appointed former CEO Todd Vasos for a second stint, in a move to stabilize its struggling business, has already trimmed its annual forecasts three times this year.

After several earnings misses and lowered forecasts, Dollar General reiterating its outlook suggests that it is finally reaching a bottom for earnings for 2023, Truist Securities analyst Scot Ciccarelli wrote in a note.

Discount store operators in recent quarters have been struggling with a shift in shopper preferences for essentials over general merchandise, while they face competition from larger retailers such as Walmart.

Dollar General has been taking measures to keep prices low on everyday staples as well as offering discounts and promotions to clear excess stock.

Last week, rival Dollar Tree trimmed annual sales forecast on weaker spending from lower-income households.

Dollar General’s inventories in the third quarter declined 1.8% year-on-year. But gross margins fell 147 basis points, as it grappled with a rise in retail shrink, where inventory is either lost, damaged or stolen.

The company said it expects to open 800 new stores in fiscal 2024, down from 990 stores it expects to open in 2023.

According to Wells Fargo analysts, slower store growth was encouraging, given the need to focus on core business and rising competition.

The company’s same-store sales fell 1.3% for the quarter, compared with LSEG estimates of a 2.08% drop.

It posted a per-share profit of $1.26, versus analysts’ expectations of $1.19.

(Reporting by Granth Vanaik in Bengaluru; Editing by Shilpi Majumdar)