Dollar General Corp.’s Stock Plummets After Disappointing Q2 Earnings

Dollar General Corp. (DG) experienced a significant decline of 13.7% in premarket trade on Thursday following the release of weaker-than-expected second-quarter earnings and a downward revision of its guidance. Despite this setback, Dollar General’s CEO, Jeff Owen, acknowledged the company’s progress in enhancing supply chain execution, improving store operations, reducing inventory growth rate, and strengthening its pricing strategies.

Financial Performance

During the second quarter, Dollar General reported a net income of $468.8 million, or $2.13 per share, indicating a decrease from the $678.0 million, or $2.98 per share, recorded in the same period last year. However, sales increased to $9.796 billion from $9.426 billion in the previous year.

Expectations vs. Reality

The FactSet consensus projected earnings per share (EPS) of $2.47 and sales of $9.926 billion. Unfortunately, Dollar General fell short of these expectations, with same-store sales even experiencing a 0.1% decline compared to the anticipated 0.9% rise.

Strategic Investments and Revised Guidance

CEO Jeff Owen announced that the company plans to make further investments in inventory reduction and growth stimulation. These investments are expected to result in an operating profit headwind of up to $170 million in the second half of the year.

As a consequence, Dollar General has decided to lower its guidance for sales growth. The new projection anticipates an increase of 1.3% to 3.3%, as opposed to the previous forecast of 3.5% to 5.0%. Similarly, the company now expects EPS to range from approximately $7.10 to $8.30, signifying a decline of 34% to 22%. This adjustment is in contrast to the prior guidance, which predicted a decrease of about 8% to flat growth.

Additionally, Dollar General has revised its expectations for same-store sales, which are now projected to decline by approximately 1% to show an increase of roughly 1%. This revision differs from the previous guidance that indicated a growth of 1% to 2%.

Market Performance

Since the beginning of the year, Dollar General’s stock has experienced a sharp decline of 36%. In comparison, the S&P 500 has recorded a gain of 17.6%.