Fears of an economic slowdown amid U.S President Donald Trump's trade policies, and spending cuts in the federal government have led to a cautious retail outlook for the year.
"What has become apparent as we move into Q1 is trade down is back," said CEO Todd Vasos during a post-earnings call, talking about buying trends among its customers, who are typically from the lower-income groups earning less than $50,000 annually.
"Many of our customers report that they only have enough money for basic essentials with some noting that they have had to sacrifice even on the necessities. We are not anticipating (an) improvement in the macro environment, particularly for our core customer."
The company forecast fiscal 2025 profit of about $5.10 to $5.80 per share below estimates of $5.85, according to data compiled by LSEG. Its same-store sales growth target of 1.2% to 2.2% also came below estimates.
But its holiday-quarter results beat expectations, sending the company's shares up 4% on Thursday, helped by store remodelling and inventory trimming initiatives.
Dollar General's stock had slumped nearly 70% in the last two years amid stiff competition from Walmart, Shein and Temu, but the return of CEO Vasos in 2023 and his turaround plans are helping the company recover.
In the fourth quarter, Dollar General reviewed its namesake banner portfolio and closed 96 stores, mostly in urban locations, that Vasos said had become challenging to operate.
"We believe these closures could just be the beginning of a larger culling process," said Truist Securities analyst Scot Ciccarelli.
Dollar General's fourth-quarter comparable sales growth of 1.2% beat estimates, while profit of $1.68 per share also topped expectations of $1.50.
