Dollar General Corp. forecast sales to grow this year in a range with the top end higher than what Wall Street expected, giving investors optimism that the discount chain’s recent woes are easing.
The Goodlettsville, Tennessee-based retailer said comparable sales will gain as much as 2.2% this year. Analysts projected growth of about 1.8% on average.
Dollar General and other discounters have been struggling along with their low-income customers, a trend the retailer said continued into this year. Analysts have also said big-box rivals such as Walmart Inc. are taking market share.
Shares of Dollar General rose as much as 6% on Thursday. The stock had gained 1.3% this year through Wednesday.
The retailer sees earnings per share this year in a range of $5.10 to $5.80, with the top end narrowly trailing the average Wall Street estimate.
Last quarter, comparable sales and revenue beat estimates, with Dollar General pointing to a strong performance in the consumables category and declines in seasonal, home and apparel.
That came even as customers remained under pressure, with some shoppers pulling back on necessities, Chief Executive Officer Todd Vasos said Thursday on the earnings call.
Profit miss
Profit last quarter missed badly, with the company citing the impact of the costs associated with the review of its store profile and closing locations. The chain reported earnings of 87 cents a share, while Wall Street’s average projection was $1.50.
Dollar General has “emerged from the doldrums that plagued the chain,” said Neil Saunders, managing director at GlobalData. This year will continue a “gentle rebuilding,” but “a lot more work is needed” for the chain to get back to being a “powerhouse” among value retailers, he said.
Adding to Dollar General’s challenges are rising concerns about a pullback in consumer spending. Retailers, including Walmart, Dick’s Sporting Goods Inc. and Macy’s Inc., have underwhelmed investors with their outlooks for this year. Some chains have pointed to the potential for President Donald Trump’s tariffs to trigger price increases.
Dollar General had been cruising for years, with robust sales growth and its stock surging. The chain’s main growth engine was opening thousands of new stores. The retailer topped 20,000 locations this year, making it the largest chain in the US.
But that formula didn’t hold up. The performance of existing stores weakened, and the chain has invested in improving them. That’s included simplifying operations, by reducing how many products stores sell, and remodeling thousands of locations.
The company plans to open about 575 stores this year.
