Dollar General’s supply chain stumbles dent annual profit forecast

By Deborah Mary Sophia and Granth Vanaik

(Reuters) -Dollar General Corp cut its annual profit forecast after it missed estimates for quarterly earnings, blaming cost pressures tied to its supply chain problems, sending its shares down as much as about 10% on Thursday.

Tennessee-based Dollar General said it was seeing inefficiencies in its supply chain due to unexpected delays in acquiring additional warehouse space to store inventory, and the early arrival of seasonal merchandise.

While the company is opening more storage facilities to relieve the capacity constraints, it saw more than $40 million in additional costs in the third quarter compared to its expectations, stemming from transportation and expenses related to delays in returning shipping containers.

Dollar General, which in July named insider Jeff Owen as its chief executive, now expects fiscal 2022 profit per share to increase about 7% to 8%, compared with its prior outlook of a rise of about 12% to 14%.

“It’s unusual for this well-run company to stumble on execution issues. The fact that it’s occurring during the CEO transition and seemed to come out of left field isn’t a great look,” Wells Fargo analyst Edward Kelly said.

Rival Dollar Tree Inc last month cut its full-year profit forecast for the second time, citing price cuts and weak demand for discretionary goods, while discount store peer Big Lots Inc also posted downbeat quarterly results earlier on Thursday.

Dollar General’s quarterly per-share profit of $2.33 missed analysts’ estimates of $2.54, according to Refinitiv IBES data.

The retailer, however, said its annual same-store sales would be toward the upper end of its previously expected range of 4.0% to 4.5%, after topping same-store sales estimates for the reported quarter.

(Reporting by Granth Vanaik and Deborah Sophia in Bengaluru; Editing by Sriraj Kalluvila, Shounak Dasgupta and Anil D’Silva)