Dollar General Stock Takes a Dive Following Forecast Reduction, Citing Theft
Dollar General has significantly revised its sales and profit projections for the year, attributing the adjustments to various challenges, including a decrease in consumer spending on non-essential items and an escalation in theft.
As a consequence of this announcement, Dollar General's stock took a sharp tumble of approximately 14%, settling at around $135 per share during midday trading on Thursday.
These difficulties faced by the discount retailer serve as another indicator of American consumers scaling back their shopping activities, particularly in light of persistent inflation rates well above the Federal Reserve's 2% target.
Neil Saunders, a retail analyst and Managing Director at GlobalData, highlighted the core factor behind these challenges, stating, "One of the key reasons for this is because Dollar General's core customers are feeling the acute pressure of the cost-of-living crisis." He pointed out that this situation has been exacerbated by reductions in SNAP (Supplemental Nutrition Assistance Program) payments as temporary pandemic-related benefits came to an end.
Consequently, lower-income shoppers are curtailing their expenditures on non-essential and indulgent items from Dollar General in an effort to save money. Saunders added, "Unfortunately, this dynamic will not change any time soon as, if anything, finances will tighten over the second half of the year."
In light of these developments, Dollar General has adjusted its full-year sales expectations to a growth range of 1.3% to 3.3%, down from the previous forecast of 3.5% to 5%. Additionally, it anticipates a full-year earnings decline of 22% to 34%, compared to the prior estimate of a flat-to-8% decrease.
The retailer also revised its expectations for same-store sales (sales at stores open for at least a year) for the year, now projecting a range from a decline of about 1% to an increase of 1%, as opposed to the earlier forecast of a 1% to 2% increase.
In a call with analysts, Dollar General CEO Jeff Owen addressed a tragic incident that occurred at a Dollar General store in Jacksonville, Florida, the previous week, which authorities referred to as a racially motivated attack that claimed three lives. Owen expressed condolences and emphasized the importance of community support during such times of tragedy. He also commended the swift response of local law enforcement in Jacksonville and their ongoing commitment to safeguarding Dollar General's associates, customers, and communities nationwide.