Dollar General Corp.’s stock tumbled 13.9% in premarket trade Thursday, after the discount retailer posted weaker-than-expected second-quarter earnings and lowered its guidance.
“While we are not satisfied with our overall financial results, we made significant progress in the second quarter improving execution in our supply chain and our stores, as well as reducing our inventory growth rate and further strengthening our price position,” Jeff Owen, Dollar General’s chief executive officer, said in a statement.
The Goodlettsville, Tenn.-based company
DG,
had net income of $468.8 million, or $2.13 a share, for the quarter, down from $678.0 million, or $2.98 a share, in the year-earlier period. Sales rose to $9.796 billion from $9.426 billion.
The FactSet consensus was for EPS of $2.47 and sales of $9.926 billion.
Same-store sales fell 0.1% while FactSet was expecting a 0.9% rise.
The sales increase was mostly due to positive contributions from new stores, which were partially offset by a decline in same-store sales and store closures. Same-store sales were hurt by lower traffic, partly offset by higher average transaction amount.
Owen said the company is making further investments to draw down inventory and drive growth in areas such as retail labor and expects an operating profit headwind of up to $170 million in the second half from those investments.
“Same-store sales in the second quarter of 2023 included declines in each of the home, seasonal, and apparel categories, partially offset by growth in the consumables category,” said the statement.
Gross profit as a percentage of sales was 31.4%, down from 32.3% a year ago, for a 126-basis-point decline. That was mostly due to lower inventory markups and increased shrink, markdowns and inventory damages, as well as a greater proportion of sales coming from the consumables category, which has a lower gross profit rate than other product categories.
Many retailers this earnings season have complained about the impact of shrink, which can refer to damaged goods, but more often means shoplifting, which retailers claim is being conducted by highly organized gangs.
Walmart
WMT,
Target
TGT,
Home Depot
HD,
Nordstrom
JWN,
and Dollar General’s key rival Dollar Tree
DLTR,
have all complained this earnings season about the issue.
See: Walmart’s ‘shrink’ challenges differ from those of other retail giants, CEO says
Related: Target facing ‘unacceptable amount’ of retail theft and organized retail crime, CEO says
Dollar General lowered its guidance and said it now expects sales to be up 1.3% to 3.3%, compared with prior guidance of up 3.5% to 5.0%. It expects EPS of about $7.10 to $8.30, or a decline of 34% to 22%, compared with prior guidance for a decline of about 8% to flat growth.
It said it expects same-store sales to be down about 1% to up about 1%, compared with prior guidance of growth of 1% to 2%.
The stock has fallen 36% in the year to date, while the S&P 500
SPX,
has gained 17.6%.
For more, read: As concerns mount about organized retail crime, these are the products being targeted
