Dollar Stores' Same-Store Sales Disappoint
August 25 2016 - 9:20AM
Dow Jones News
Dollar General Corp. reported weaker-than-expected sales growth
in its latest quarter, hurt by declining traffic, signaling that
discount retailers are also vulnerable to the trend of dwindling
consumer spending in brick-and-mortar stores.
Same-store sales increased 0.7%, compared with the 2.6% growth
analysts were expecting, according to the consensus estimate from
Consensus Metrix. Dollar General said an increase in average
transaction amount was offset by declining traffic. Shares skidded
7.4% to $85 in premarket trading.
Dollar General's chief executive, Todd Vasos, said food
deflation, a reduction in food stamp participation rates and
benefit levels and a mild spring hurt the business. Mr. Vasos also
said competition also intensified in some regions.
Like rival Dollar Tree Inc., Dollar General has benefited over
the past year from rising wages among core customers, who in the
second quarter saw their wages increase at the best clip since the
recession. Sales and traffic had been up in the sector, in contrast
to trends across the larger retail space, and both stocks had
benefited.
Also Thursday morning, Dollar Tree's sales results came in below
its expectations. Same-store sales increased 1.2%, compared with a
2.7% increase a year ago. Analysts, on average, expected 2.6%
growth in the latest quarter. Dollar Tree shares fell 6% to $89.16
premarket.
Dollar General has been working to grow its footprint after last
year losing out on a merger between rivals. The company bid to buy
Family Dollar, which ultimately merged with Dollar Tree in a deal
worth about $9 billion. Since then, Dollar General has said it
would boost its store base by about 50%, targeting 20,000 shops by
2020.
As part of that plan, the company bought 41 Walmart Express
shops last month across nearly a dozen states. Those locations, the
company said, would add to a list of about 120 stores that offer
some perishable food. As shoppers continue to move online, Dollar
General has said it would add more fresh foods and health and
beauty products to its aisles—items that tend to boost traffic.
In all, Dollar General reported a profit of $306.5 million, or
$1.08 a share, up from 282.3 million, or 95 cents a share, a year
earlier. Revenue rose 5.8% to $5.39 billion in sales. Analysts
projected $1.09 in per-share profit on $5.50 billion in sales,
according to Thomson Reuters.
Meanwhile, Dollar Tree reported a profit of $170.2 million, or
72 cents a share, compared with a year-earlier loss of $98 million,
or 46 cents a share. Revenue increased to $5 billion from $3.01
billion, helped by the acquisition. The company anticipated 66
cents to 72 cents a share in earnings, and revenue between $5.03
billion to $5.12 billion.
Write to Joshua Jamerson at joshua.jamerson@wsj.com and Lisa
Beilfuss at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
August 25, 2016 09:05 ET (13:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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