Dollar General misses estimates as customers curb spending, costs rise

By Granth Vanaik

(Reuters) -Dollar General Corp on Thursday missed Wall Street estimates for fourth-quarter results as the retailer struggled with surging costs and a decline in customer traffic at its stores.

The discount store chain said despite a “modest decrease in customer traffic” in the reported quarter, it saw an increase in average transaction amount, and reiterated its full-year same-store sales and profit forecasts made in February.

“People have been consolidating their trips and trying to stretch the dollars and maybe make it last longer,” said Telsey Advisory Group analyst Joseph Feldman.

Dollar General, like rival Dollar Tree Inc, has seen a slowdown in demand for higher-margin discretionary products such as houseware and apparel in favor of more need-based consumable goods as inflation remains high.

Dollar General said on Thursday 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.

Same-store sales for the company climbed 5.7% in the fourth quarter ended Feb. 3, but missed analysts’ average estimate of a 6% increase, according to Refinitiv data, due to inventory damages caused by winter storm Elliott.

The company earned a profit of $2.96 per share. Analysts were expecting $2.97 per share.

“DG’s fourth-quarter update provides further evidence this historically strong performing company has sputtered,” said Wells Fargo analyst Edward Kelly.

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