Dollar General lifts annual targets on strong demand for affordable essentials

By Juveria Tabassum and Sanskriti Shekhar

Aug 28 (Reuters) - Dollar General DG.N raised its annual sales and profit forecasts on Thursday, banking on steady demand from cost-conscious consumers across income brackets in the United States amid tariff and inflation concerns.

The company's shares rose about 6% in premarket trading and are up nearly 47% so far this year, as investors bet on demand for its more affordable goods - about 2,000 items priced at or below $1 - to help sidestep broader retail weakness.

"The dollar stores have seen customers shopping more frequently this year as they seek value. Most have called out seeing a trade-down customer," said Joe Feldman, analyst at brokerage Telsey Advisory Group.

For the quarter ended August 1, Dollar General's same-stores sales rose 2.8%, beating an estimate of a 2.5% rise, helped by growth in customer visits as well as the amount spent per visit.

While lower-income consumers were struggling to afford even necessities, the company's cheaper-priced product assortment was gathering higher-income customers to its stores, Dollar General said earlier this year.

Retail bellwether Walmart WMT.N also raised its annual sales target earlier this month, as more Americans shop for lower-priced everyday essentials.

Dollar General said on Wednesday it was taking into consideration "the potential for uncertainty related to consumer behavior" in its annual targets.

The company had said in May it expected some price increases due to U.S. President Donald Trump's tariff policies, but would aim to absorb most costs by negotiating with suppliers and adjusting product sourcing and design.

Dollar General raised its annual earnings per share target to between $5.80 and $6.30, from $5.20 to $5.80 per share, as it also benefits from cost savings through its two store-remodeling projects to fix product placements and merchandising.

The company now expects 2025 net sales growth of 4.3% to 4.8%, up from its prior forecast of between 3.7% and 4.7% growth.

Its second-quarter adjusted profit of $1.86 per share also handily beat an estimate of $1.57 per share.