Retailers

Dollar General: Shoppers Are 'More Intentional' But Still Spending

A still-strong jobs market is giving customers confidence to shop, retailer says as it boosts sales outlook
Photograph courtesy of Dollar General

Dollar General same-store sales ticked down 0.1% in the first quarter of fiscal 2022, the Goodlettsville, Tenn.-based retailer said May 26, but in an earnings call with analysts and investors, Dollar General execs struck a markedly more buoyant tone than was heard during Walmart's and Target's quarterly earnings calls last week. 

That small slide in same-store sales for the quarter that ended April 29 was an improvement from the fourth quarter of fiscal 2021, when comp sales were off 1.4%, and a better-than-expected result vs. the company's own expectations of a 1% to 2% slide to start the fiscal year. Net sales for the fast-growing dollar chain in the first fiscal quarter were up 4.2% year over year to $8.8 billion.

A 9.2% increase in food and beverage sales helped offset sales declines in the seasonal, apparel and home products categories, company leaders said, and Dollar General raised its full-year sales outlook as it anticipates seeing continued strong interest from price-conscious consumers in a still-healthy U.S. job market. 

"Our unique value and convenience offering continues to resonate with both new and existing customers," Dollar General CEO Todd Vasos told analysts. Shoppers are being more "intentional" with their spending and are staying closer to home when they shop, Vasos said, but they continue to spend on both consumables and nonconsumables. Vasos noted that fresh produce is expected to be available in more than 3,000 Dollar General stores by the end of 2022.

"The consumer overall has been fairly resilient throughout this hyperinflation," Vasos said. When it comes to Dollar General's core customer, "As long as she’s gainfully employed, that makes the biggest difference in giving her the confidence to spend," he stated.

"She always wants a little bit of an indulgence," Vasos continued, "and we offer that opportunity at a really low price."

Inflation boosted baskets for the company in the first quarter, helping to offset a decline in traffic, Dollar General stated in a news release. Gross profit as a percentage of net sales came in at 31.3% in the first quarter, down 151 basis points from 32.8% in the year-ago period. Diluted EPS fell 14.5% to $2.41.

"Despite ongoing headwinds due to supply-chain pressures and heightened inflation, we remained focused on controlling what we can control and delivered solid financial results, which exceeded our expectations for sales and EPS for the quarter," Vasos stated in the release. "We continue to drive strategic innovation as we further differentiate Dollar General in the discount retail channel."

For the full fiscal year, same-store sales growth is now projected to be 3% to 3.5%, vs. the company's previous expectation of 2.5%. Dollar General opened a net 226 new stores in the quarter, and the retailer reiterated its plans for 1,110 new store openings over the course of the year.

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