Dollar General’s shares decline due to reduced consumer spending and theft.

Dollar General⁣ Corp. Shares Drop After Disappointing ‌Earnings Report

Dollar General Corp. shares took a hit, dropping 12 percent on Monday‌ afternoon ‌following⁣ the release of a weaker-than-anticipated earnings report ‌for the second quarter. The company ​also issued a warning about consumer trends and theft, causing concern⁢ among investors.

The company ⁢revised its net sales growth expectations,⁢ projecting a⁤ range⁣ of ‍1.3 percent to 3.3 percent, down from ‍the previous estimate of 3.5 percent⁢ to 5 percent. Additionally, Dollar General⁤ expects same-store ⁣sales growth⁢ for ⁤fiscal⁢ 2023 to ‌range from a 1 ⁤percent decline to 1 percent growth, a ⁢decrease from previous expectations.

Concerns About Gross Profit and Consumer ⁢Trends

The ⁣company’s news release stated, “Gross ⁢profit as a percentage of net sales was⁢ 31.1 ‍percent in the second quarter of 2023 compared to 32.3 percent in the⁢ second quarter of 2022, a decrease ‌of ⁢126 basis points. This gross profit rate decrease⁢ was primarily attributable to⁣ lower inventory markups and⁤ increased shrink, markdowns, ⁢and inventory ⁣damages, as well as a greater proportion of sales​ coming from the ​consumables‍ category, which generally has a lower gross profit rate than other product categories.”

Rising Concerns About Theft and Shoplifting

The⁣ term “shrink” refers to inventory loss⁤ due to causes other ⁤than sales, ⁢such as theft or⁣ shoplifting. Retail⁣ groups have reported⁣ a significant increase in theft in recent months, which has impacted Dollar‍ General’s gross profit​ and overall performance.

The company also reported a decrease in same-store sales by 0.1 percent, lower than previous‌ expectations. Operating profit experienced a significant decline of​ 24.2 percent, amounting to‌ $692.3 million, and diluted earnings per share ‍dropped by 28.5 percent to $2.13 per share.

Despite the disappointing results,‍ Dollar General’s CEO, Jeff Owen, expressed optimism about the ‌company’s progress ‌in improving supply ⁢chain ⁣execution, store operations, and inventory management. He stated, “We are now taking further⁣ actions and making additional investments to accelerate our ​progress and ultimately serve our customers‍ even better. These investments will strengthen our foundation as we move into 2024 and focus ‍on ‍driving sustainable growth and creating long-term shareholder value.”

In a call with analysts, ⁤Mr. Owen highlighted that consumers⁣ are being cautious with their spending, prioritizing essential items over discretionary purchases. To ‍adapt, Dollar General has ‍implemented price reductions on key items.

Retail analyst⁤ Neil Saunders noted that Americans are scaling⁤ back on shopping due to⁢ high inflation. He explained,​ “Dollar General’s core customers are feeling the acute pressure ⁢of the cost-of-living crisis.” Lower-income shoppers are cutting back on non-essential‌ purchases, especially after the reduction ⁣in SNAP⁤ payments following the⁣ end ​of temporary pandemic ⁢benefits.

Jefferies analyst Corey Tarlowe described Dollar General’s ⁢results as soft but emphasized the company’s‌ resilience. He ​stated, ‌”[Dollar General] stays well-positioned due to its high mix of consumables, private label expansion, and organic growth​ opportunities.”