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Dollar General Inc. has revised its full-year sales and profit forecast downward following a significant drop in its stock price.
The company's shares fell by 32% on Thursday, August 29, marking the largest decline since its initial public offering in 2009. This decrease adds to the 9% drop experienced earlier this year, according to Bloomberg.
Dollar General Cuts Sales Forecast
The discount retailer's CEO, Todd Vasos, attributed the sales decline to reduced spending by low-income customers, who are struggling with rising costs for essentials like rent and healthcare. During a call with analysts, Vasos highlighted that over 60% of households have had to cut back on basic necessities due to inflation.
On Thursday, Dollar General announced a revised outlook, expecting same-store sales to increase by just 1% to 1.6% this year, down from the previous forecast of 2% to 2.7%. This adjustment reflects a broader trend of decreased consumer spending, particularly among the retailer's core customers who earn less than $35,000 annually.
The company is also facing increased competition from rivals such as Walmart and Target. Walmart recently reported strong sales growth, attracting shoppers who are adjusting to rising costs. Target reversed a year-long sales slide with appealing grocery deals. In contrast, Dollar General has struggled to maintain its position amid these competitors and shifting consumer preferences.
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Store Closures, Legal Settlements Add to Dollar General's Struggles
Dollar General's financial troubles are compounded by recent legal and operational challenges. Last month, the company settled with the Department of Labor for $12 million, addressing claims of unsafe working conditions and blocked emergency exits. The retailer also plans to close nearly 1,000 stores over the next few years as part of a broader restructuring effort.
Despite these difficulties, Vasos remains committed to the turnaround plan he implemented after returning to the company from retirement last year. The plan includes efforts to enhance store safety and improve customer experience.
According to CBS News, retail analyst Neil Saunders of GlobalData noted that although some economic indicators are positive, they have not yet translated into increased spending at Dollar General. Consumers are being cautious, spending less on discretionary items like seasonal and home products, which impacts the company's profitability.
As Dollar General navigates these challenges, it faces a retail environment where value-for-money is crucial. Analysts believe that as inflation eases, shoppers will continue to seek the best deals, intensifying competition for discount retailers.
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