Dollar General, Dollar Tree boost outlook as consumers grapple with
Dollar General and Dollar Tree stores
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Shares of Dollar General and Dollar Tree popped Thursday, as the discounters beat Wall Street’s quarterly earnings expectations, raised outlooks for the coming year and spoke of consumers flocking to lower prices during inflationary times.
As of midday Thursday, shares of Dollar General were up about 14% and Dollar Tree were up about 20%.
The two retailers said they see opportunity to grow as Americans weigh value more heavily in their purchasing decisions, whether buying groceries or seasonal decor.
“We’re already starting to see our core customers start to shop more intentionally,” Dollar General CEO Todd Vasos said on a call with analysts. And we’re starting to see that next tier of customers start to shop with us a little bit more as well.”
Dollar Tree Executive Chairman Rick Dreiling listed the many challenges that consumers are facing, from the highest levels of inflation since the early 1980s to record high gas prices and uncertainty from current events like the Ukraine war and the pandemic. He added that many consumers “are living paycheck to paycheck.”
“In tough times, value retail can be part of the solution to help families stretch their dollars to meet their evolving needs,” he said.
Dollar General and Dollar Tree beat expectations on fiscal first quarter earnings, revenue and same-store sales.
Dollar Tree, which includes the Family Dollar banner, said it now expects net sales for the year to range from $27.76 billion to $28.14 billion compared with its previous expectations between $27.22 billion to $27.85 billion.
Dollar General said it expects net sales growth of about 10% to 10.5% compared with its previous expectation of about 10%. It raised its same-store sales forecast to growth of approximately 3% to 3.5% compared with its previous expectation of 2.5%.
Here are three major takeaways from the two discounters fiscal first-quarter earnings reports:
A different merchandise mix
Shoppers are still coming to stores, but are buying different items. Food is a bigger part of baskets and drove sales for Dollar General and Dollar Tree in the fiscal first quarter.
A year ago, consumers had extra dollars from stimulus checks and child tax credits. That meant some sprang for impulse items or discretionary purchases. Those dollars have disappeared and other budget items, such as groceries and gas, have become pricier.
Vasos said same-store sales at Dollar General dropped in each of the seasonal, apparel and home products categories in the fiscal first quarter, but more consumables sold. Overall, same-store sales dropped 0.1% versus the year-ago period, besting the 1.3% decline anticipated by analysts, according to FactSet.
At Dollar Tree, carbonated beverages, salty snacks and cookies were some of the items that surged in popularity — especially as the retailer expanded its food and beverage assortment. The company is the parent of Family Dollar, a banner that skews more heavily to food…
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