DG Stock Price Drop : Dollar General (DG) stock plummeted by 28% on Thursday. This decline followed the company’s announcement that it had cut its outlook.
The discount retailer cited financial pressures on its customer base as the reason for the adjustment.
Revised Sales Expectations
For fiscal 2024, Dollar General expects same-store sales growth to range from 1% to 1.6%. Previously, the company had projected growth between 2.0% and 2.7%. This downward revision reflects a struggling consumer landscape.
DG Stock Price Drop – Financial Strain on Customers
CEO Todd Vasos expressed concerns about the financial strain on lower-income consumers. During the earnings call, he stated, “It appears to us very strongly that this lower-end consumer continues to be very much financially strapped, especially as it relates to her ability to feed her families and support her families.”
Vasos noted that the last week of each month was particularly weak. Customers gravitated towards items priced at $1 or below and focused on consumables rather than seasonal, home, or apparel items. This shift indicates an increasingly cash-strapped consumer, which is more pronounced than in the previous quarter.
Impact on Competitors
Dollar Tree (DLTR), a rival discount retailer, also saw its shares drop over 9% following Dollar General’s news. Dollar Tree is set to report its quarterly results next week.
Back to Basics Plan
Dollar General has been trying to improve its business with a “Back to Basics” plan. This initiative, led by CEO Vasos, aims to address the challenges facing the company. However, Wall Street’s optimism about the dollar store model has waned. Competitors like Walmart (WMT) are expanding their offerings to attract a wider range of customers.
Analyst Arun Sundaram from CFRA Research downgraded Dollar General’s stock from Buy to Hold. He explained, “Dollar store operators have somewhat lost their appeal for value and convenience as other retailers like Walmart expand their omni-channel offerings and have more levers to keep prices low.”
Sundaram also expects Dollar General to invest more in store upgrades, price cuts, inventory markdowns, and wage increases, which may squeeze profit margins.
DG Stock Price Drop – Financial Results Overview
In its latest quarterly report, Dollar General reported adjusted earnings per share of $1.70, falling short of the expected $1.79. The company generated revenue of $10.21 billion, which missed Wall Street’s consensus estimate of $10.36 billion.
Year-to-date, Dollar General’s stock has plummeted over 30%, highlighting the ongoing challenges the retailer faces.
*Source: Yahoo Finance
