Dollar General expects muted annual sales on weak spending, shares drop

By Anuja Bharat Mistry

March 12 (Reuters) - Dollar General DG.N forecast soft full-year sales on Thursday, signaling weaker demand as budget‑conscious shoppers grow more selective with their purchases amid economic uncertainties, sending its shares down about 7% in early trading.

Increasing costs of living and signs of deteriorating labor market conditions are making consumers, especially from lower-income groups, hesitant to shop for nice-to-have items, in turn hurting sales at retailers.

The U.S. unemployment rate rose 4.4% in February, from 4.3% in January. Consumer prices also likely accelerated in February, fueled by tariffs and a rise in the costs of gasoline and oil due to tensions in the Middle East.

The company expects fiscal 2026 same-store sales to grow in the range of 2.2% to 2.7%, compared with analysts' estimates of 2.48%, according to data compiled by LSEG.

The midpoint of its annual profit forecast range of $7.10 to $7.35 per share was largely in line with estimates of $7.21 per share. The outlook reflects efforts to manage cost inflation and ongoing uncertainty in consumer behavior.

A severe winter storm in early February led to temporary store closures, affecting sales at the start of the year, Dollar General CFO Donny Lau said on a post-earnings call.

The resulting dent in demand prompted the company to forecast first-quarter comparable sales below estimates.

Analysts with Truist Securities said sales growth from higher-income consumers softened noticeably in February amid a broader slowdown early in the first quarter, adding that the forecast could be more "conservative" than some investor expectations.

The stock has risen about 10% this year, after surging more than 75% in 2025.

Dollar General has been contending with stiff competition from retail behemoth Walmart and e-commerce giant Amazon.com AMZN.O, which have managed to win over value-seeking customers.

Walmart WMT.N, which saw online sales increasingly driven by higher‑income shoppers, maintained a cautious full‑year outlook despite posting upbeat quarterly sales.

However, Dollar General's efforts to offer the majority of its products at or below $1, coupled with attractive holiday deals, helped the company beat sales and profit estimates during the holiday quarter.

Its fourth-quarter same-store sales grew 4.3%, above estimates of 3.34%.

The company, which has beaten quarterly profit estimates for five consecutive quarters, earned a profit of $1.93 per share in quarter ended January 30, topping estimates of $1.65 per share.

Rival Dollar Tree DLTR.O is scheduled to report earnings next week.