The discount store chain Dollar General has raised its forecast for the year.
A chain of inexpensive goods stores, Dollar General Corp. (DG), is becoming especially popular during economic uncertainty. The past quarter has shown that the company can maintain the loyalty of its customers and increase sales. Dollar General’s sales increased 9% year-on-year in the last quarter to $9.4 billion. At the same time, the company exceeded the sales level of the second quarter of 2019 by 35%, which indicates a complete recovery. Comparable sales in the second quarter increased by 4.6% due to heavier traffic and attracting buyers from competing networks.
As a result, after presenting strong quarter results, Dollar General management once again raised its forecast for the whole year. According to the new plan, revenue for the current year will grow by 11%, and comparable sales will increase by 4-4.5%. A change in consumer priorities may pressure Dollar General’s profits. So, now buyers spend more on food, including long-term storage, than on clothes, seasonal goods, and household goods. Food products, as a rule, have a smaller margin, which will limit the profit growth of the discount chain. In addition, unresolved supply chain issues will continue to pressure profitability.
However, Dollar General has demonstrated an increase in gross, operating, and net margins. Dollar General continues its shareholder refund programs. In the second quarter, the company repurchased $349 million worth of shares and declared quarterly cash dividends of $0.55 per share, representing about a 1% annual return. The Board of Directors also increased the buyback program by another $2 billion. In times of high inflation and economic uncertainty, people are more likely to shop at discount stores like Dollar General to save money on food and household goods. So, that Dollar General will keep growing its sales and market share over the next few quarters.
