Dollar General, Dollar Tree buyers continue to tighten their belts as tax risks increase
It's been a tough year for Dollar General ( DG ) and Dollar Tree ( DLTR ) as shoppers pinch their pennies and uncertainty continues.
“The retail landscape is really changing. Right now, we have a lot of winners Walmart, Amazon, and other struggling companies,” R5 Capital founder and CEO Scott Mushkin told Yahoo Finance's Morning Brief.
As consumers look for value, stores like Walmart ( WMT ) with cheap groceries as a draw are taking market share. In addition, President-elect Trump's tariffs could be another factor affecting the industry.
Both companies reported muted earnings results this week.
Dollar General's same-store sales grew 1.3% in the third quarter, compared to the 0.97% expected by Wall Street. That was driven by an increase in transaction size and a 0.3% increase in foot traffic. Its grocery business continues to attract buyers while its home, seasonal, and apparel segments remain soft.
Revenue of $10.18 billion beat expectations of $10.14 billion. Adjusted earnings came in at $0.89 per share, missing the consensus estimate of $0.94. It expects fourth-quarter sales to grow between 1.1% and 1.4% year over year.
“Dollar General's core customer remains financially stressed,” CEO Todd Vasos said on its earnings call Thursday. Its consumers “can't stretch their budget at the end of the month,” he added.
Dollar Tree's same-store sales increased 1.8% from last year, beating expectations of 1.38%, boosted by an increase in average tickets and a 1.5% increase in foot traffic.
Revenue of $7.56 billion also gave good estimates of $7.47 billion. Adjusted earnings per share came in at $1.12, compared with estimates of $1.08.
Dollar Tree's interim chief executive, Michael Creedon, said in the earnings call that there continues to be “evidence of belt-tightening, particularly among low-income customers, and to a lesser extent, among middle- and upper-income families with young children.”
Dollar Tree CFO Jeff Davis said same-store sales in November “got off to a slow start” as shoppers “postponed shopping trips to closely follow the ins and outs of the national election.” The company is also looking at the impact of the short holiday season.
For the fourth quarter, Dollar Tree expects same-store sales growth in the low single digits for both its namesake business and the Family Dollar chain.
Joe Feldman of Telsey Advisory Group said Dollar Tree “continues to make progress on a number of company-specific initiatives” such as offering more price points and restructuring Family Dollar, as acquisitions remain a headache.
