Dollar General misses sales estimates as fewer customers shop

FILE PHOTO: A view of a Dollar General store and shopping carts in Mount Rainier, Maryland

(Reuters) -Dollar General Corp on Thursday missed Wall Street expectations for fourth-quarter results as fewer customers shopped at its stores and as the discount store chain reeled from soaring costs.

Shares of Dollar General fell about 1% in premarket trading as the company also reiterated its full-year same-store sales and profit forecasts made in February.

The discount store chain, similar to many other U.S. retailers, has seen a slowdown in demand for discretionary products such as houseware and apparel in favor of more need-based consumable goods.

Rival Dollar Tree Inc has also echoed a similar sentiment, indicating that consumers were curbing purchase of higher-margin discretionary items. They are generally more profitable than consumable products.

Additionally, while Dollar General saw an increase in average transaction amount, it said there was a “modest decrease in customer traffic” in the reported quarter.

Dollar General’s same-store sales rose 5.7% in the fourth quarter, missing analysts’ average estimate of a 6% increase, according to Refinitiv data, due to inventory damages caused by the winter storm Elliott.

The company expects fiscal 2023 net sales to grow between 5.5% and 6%, the mid-point of which is roughly in line with analyst expectations of an increase of 5.8% to $40.07 billion.

Dollar General has also been wrestling with higher costs associated with freight, raw materials and labor and is also grappling with persisting supply chain issues that have hit its profit margins.

The company said it would invest about $100 million in its stores, primarily in incremental labor hours as it looks to enhance store standards and in-store experience.

Dollar General earned a profit of $2.96 per share in the fourth quarter. Analysts were expecting $2.97 per share.

(Reporting by Granth Vanaik in Bengaluru; Editing by Shinjini Ganguli and Krishna Chandra Eluri)