Written by Granth Vanek
(Reuters) – Dollar General reported a smaller-than-expected decline in quarterly sales and beat earnings estimates on Thursday, as more shoppers turned to its stores for cheaper groceries and other necessities amid sticky inflation weighing on household budgets.
The company’s shares, which are down 45% so far this year, rose 4.4% to $139.78 after it also confirmed full-year sales and earnings forecasts.
Dollar General, which reappointed former CEO Todd Vassos in October to a second term in a move to stabilize its struggling business, cut its annual forecast three times this year.
After several earnings losses and forecast cuts, Dollar General reiterated its outlook indicating it has finally reached the bottom line for 2023, Truist Securities analyst Scott Ciccarelli wrote in a note.
Discount store operators in recent quarters have been experiencing a shift in shoppers’ preferences for essentials over general merchandise, while facing competition from big-box retailers like Walmart.
Dollar General is taking measures to keep prices low on everyday staples as well as offering discounts and promotions to eliminate excess inventory.
Last week, rival Dollar Tree trimmed its annual sales forecast due to weak spending from low-income households.
Dollar General inventories in the third quarter fell 1.8% year over year. But gross margins fell by 147 basis points, as it faced a rise in retail shrinkage, where inventory is lost, damaged or stolen.
The company said it expects to open 800 new stores in fiscal 2024, down from the 990 stores it expects to open in 2023.
According to Wells Fargo analysts, the slowdown in store growth was encouraging, given the need to focus on core businesses and increasing competition.
The company’s same-store sales fell 1.3% during the quarter, compared to LSEG’s estimate of a 2.08% decline.
It achieved earnings per share of $1.26, versus analysts’ expectations of $1.19.
(Reporting by Granth Vanek in Bengaluru; Editing by Shilpi Majumdar)
