Same-store sales fell 0.1% from the first quarter of 2022, due to lower customer traffic.
“While we were not satisfied with our overall financial results, we made significant progress in the second quarter by improving performance in our supply chain and in our stores, as well as reducing our product growth and strengthening our pricing position,” CEO Jeff Owen said in the earnings release.
Dollar total
It lowered its outlook for fiscal 2023 as it plans to accelerate its inventory reduction efforts and make additional investments in areas such as retail labor. These investments will generate operating profits of up to $170 million in the second half of 2023.
The company now expects net sales growth to be between 1.3% and 3.3% in fiscal 2023, compared to previous guidance of 3.3% to 5%. Management also expects revenue to decline in the range of 34% to 22% for the year, down from previous guidance of 8% to flat growth.
“We thought there was a risk that DG needed to invest more than stores. [management] Initially expected and therefore lower guidance, but this is much larger than we (and the market) expected,” Citi analyst Paul Lejuz wrote in a note on Thursday.
Dollar General also said soft sales trends and high inventory turnover, an industry term that refers to merchandise theft and damage, were among the drivers that led to the discontinuation of the guidance. In fact, in the second quarter, the slowdown helped lower gross profit, the company said. Profit as a percentage of net sales was 31.1%, down from 32.3% a year ago.
Dollar General said the company’s profits were higher as consumers prioritized spending on food over home, clothing and seasonal products. Food accounts for a lower gross margin than other categories.
Dollar General shares were down 17 percent to $131.39 in premarket trading. Coming into the session, the stock is down 36% in 2023.
The soft report was cut on Thursday. Oppenheimer analyst Rupesh Parikh downgraded the stock to Perform from Outperform, removing his $195 target.
“The outlook for Digi remains difficult given the current competitive/macro landscape,” he wrote in a note to clients. “We believe stocks will continue to trade at depressed prices relative to recent history.”
Write to Angela Palumbo at [email protected]
