Dollar General's second quarter shares increased.
According to Reuters, the company's shares went up 4.1 percent or $2.33 to $56.21 in early trading. This was due to the company attracting more customers by focusing on selling cigarettes and more brand name products.
John Tomlinson, head of retail at ITG Investment Research told Reuters Dollar General is being careful about its finances by sticking to its forecast of a low profit it predicted in June although its earnings per share was three cents better than what Wall Street predicted.
"They're probably being somewhat cautious given the uncertainty in the economy," Tomlinson said. "Investors are cheering the results. It's a little bit of a relief rally."
Dollar General cut the top of its profit forecast for the full year because sales grew moderately, and because there was a decrease in sales margins since the company struggled to raise prices since shoppers were not spending as much.
The 5.1 percent sales growth in regards to same store sales, and those open at least a year, saw in the second quarter was equivalent to last year's growth, surpassing the results of competitors.
Analysts predicted an increase of 4.2 percent, Reuters reported.
In general, dollar stores have been dealing with increased competition from Wal-Mart and other large discount chains who are also doing business with consumers watching their budgets, and supplying more items for $1 or less Reuters reported.
Dollar General has been able to increase its sales for many months by selling tobacco products as it has found the majority of its customers use the product overall than other consumers. Despite these numbers, the company is also battling with the narrow price margins on these products and the pressure of overall profit margins.
The company's total sales rose 11.3 percent to $4.39 billion in the quarter outdoing market estimates of $4.36 billion.
