Low-income shoppers are scaling back spending, resulting in disappointing sales at Dollar General, which on Thursday cut its sales and profit forecast for the year.
“We believe the weaker sales trends are partially attributable to a core customer feeling financially constrained,” said Todd Vasos, Dollar General’s chief executive. The company continues with a turnaround plan it started after he returned to Dollar General from retirement last year, the CEO added.
While several economic trends are positive, “this good news has yet to trickle down to the wallets of Dollar General customers who are still very tight-lipped and cautious,” said retail analyst Neil Saunders. “They’re buying less at Dollar General and cutting back on more discretionary categories like seasonal and home products. This is eating into sales, but it’s also diluting profitability because many of the harder-hit categories have higher margins,” said Saunders, CEO of GlobalData.
The discount retailer now expects same-store sales to rise 1% to 1.6% this fiscal year, revised lower from its previous forecast of a 2% to 2.7% increase.
Dollar General may also lose ground to other stores, including Walmart and Target.
Walmart earlier this month reported strong quarterly sales in drawing Americans struggling with rising housing and food costs. Likewise, deals at the grocery store Target helped opposite a year-long sales decline earlier this month.
The results announcement comes after Dollar General agreed to pay 12 million dollars and improving security at its 20,000 stores across the country to resolve claims it is putting workers at risk with practices including blocking emergency exits.
Disclosing significant losses earlier in June, Dollar General said it plans to close almost 1,000 stores in the coming years.