Discount retail store Dollar General’s third-quarter net income plunged, which according to an analyst, signifies a reduction in discretionary spending among consumers due to macroeconomic pressures.
The company’s net income plummeted 47.5 per cent year over year to $276.2 million while operating profit tumbled 41.1 per cent to $433.5 million in the three months ended November 3.
“A lot of the pressure emanates from Dollar General’s core customers who have been squeezed by inflation for so long that it is now having a material impact on their spending habits,” said Neil Saunders, MD at GlobalData.
“In response, they are cutting back on more discretionary purchases, especially in non-consumable categories. This is weakening basket sizes and transaction values which, in turn, has a sharp negative impact on the sales line.”
Saunders, however, noted that Dollar General is not losing customers to a significant degree as its net sales grew 2.4 per cent to $9.7 billion despite same-store sales decreasing 1.3 per cent.
Meanwhile, Dollar General CEO Todd Vasos said that the company is not satisfied with its third-quarter performance but is pleased with the momentum in some underlying sales trends, including positive customer traffic, and market share gains in both dollars and units.
“We continue to believe our model is relevant in all economic cycles, and we are working diligently to further enhance our unique combination of value and convenience,” said Vasos.
For FY23, the company forecasts a 1.5 per cent to 2.5 per cent growth in net sales and a 1 per cent decline to flat growth in same-store sales. For the year, the company targets 3110 real estate projects in the US, including 990 new store openings, 2000 remodels, and 120 store relocations.
Moving forward, Dollar General is planning about 2385 projects, including 800 new stores, 1500 remodels, and 85 relocations for FY24.
“This is a modest slowdown compared to the number of projects in recent years, which we believe is prudent in this environment,” said Vasos.
“We are excited about the opportunities these projects provide to serve both new and existing customers, while also driving strong financial returns for the business and laying the foundation for future growth.”
