Dollar General Reports Disappointing Earnings

(Updated – August 29, 2024, 9:56 AM EDT)

Dollar General (NYSE:DG) saw its shares plunge more than 26% on Thursday after the discount retailer reported second-quarter earnings and revenue that fell short of analyst expectations and significantly lowered its full-year guidance.

The company reported adjusted earnings per share of $1.70 for the second quarter, missing the analyst consensus of $1.80. Revenue came in at $10.21 billion, below estimates of $10.38 billion, though up 4.2% YoY. Same-store sales increased a modest 0.5% compared to the same quarter last year.

Dollar General cut its full-year earnings outlook, now expecting EPS in the range of $5.50 to $6.20, well below its previous guidance of $6.80 to $7.55 and the analyst consensus of $7.12. The company also lowered its net sales growth forecast to 4.7%-5.3%, down from 6.0%-6.7% previously.

CEO Todd Vasos acknowledged the disappointing results, stating, “We are not satisfied with our financial results, including top-line results below our expectations for the quarter.” He cited a “core customer who feels financially constrained” as partially responsible for the softer sales trends.

The company’s gross profit margin declined 112 basis points to 30.0%, primarily due to increased markdowns, inventory damages, and shrink. Operating profit fell 20.6% to $550.0 million compared to the same quarter last year.

Despite the challenges, Dollar General maintained its plans to open 730 new stores and remodel 1,620 existing locations this fiscal year. The company’s board also declared a quarterly cash dividend of $0.59 per share.

Following the report, analysts at Telsey Advisory Group expressed disappointment with the soft 2Q24 results and the magnitude of the 2024 guidance cut, citing tough consumer spending at the lower end.

“Historically, Dollar General has done well during these tough times, but stronger competition seems to be taking a toll. Furthermore, transformation initiatives may be causing some disruption and execution challenges,” they wrote.

Analysts at Goldman Sachs noted: “SSS increased +0.5%, driven by increased traffic and partially offset by a decline in ticket. By category, growth in consumables was partially offset by declines in home, seasonal, and apparel.”

BMO Capital analysts mentioned: “DG’s F2Q25 EPS missed and fell to the low-end of management’s range, largely on lower comps. Management cut the full-year EPS guidance by 18-19%, citing its core consumer remains financially constrained and that the company is taking actions to enhance its value and convenience offering.”