Dollar General's stock was up this week as the retailer shared a better-than-anticipated outlook.
Despite lower net income and slightly lower same-store sales in the first quarter, Dollar General has upgraded its outlook for the rest of the year. The discount retailer projected revenue growth between 10% and 10.5% compared to the previous estimate of about 10% and anticipates same-store sales growth of 3% to 3.5% versus the prior expectation of 2.5%.
The company’s more optimistic take is based on consumers’ deal-seeking behavior during inflationary times and a better set of comparisons during the latter part of 2022. Comps in the first and part of the second quarter were impacted by the dispersion of COVID-related federal stimulus funds in early 2021.
While Dollar General had a 4.2% jump in net sales to reach $8.8 billion during the first fiscal quarter, same store sales were down 0.1%, and net income fell 18.5% in that same period. The company credited the increase in net sales to positive contributions from new stores and cited a decline in customer traffic and lower sales of seasonal apparel and home products for the same store dip.
In this slightly seesaw environment, shoppers spurred an increase in the sale of consumables during first quarter, a period that saw higher price indexes for food products across most categories. Demand for consumables is expected to remain strong as the rest of the inflation-affected year unfolds.
CEO Todd Vasos said that the adjusted guidance for the back half of the year is based on a better operating climate. “We are pleased with our start to 2022, and I want to thank each of our team members for their ongoing commitment and dedication to serving our customers every day,” he remarked. “Despite ongoing headwinds due to supply chain pressures and heightened inflation, we remained focused on controlling what we can control and delivered solid financial results, which exceeded our expectations for sales and EPS for the quarter.”
Echoed John Garratt, Dollar General’s CFO: “Looking ahead, our plans include targeted investments to further enhance the in-store experience, while driving an even greater improvement in in-stock levels and customer service. We believe these investments will position us well to build on our sales momentum as we move ahead.”
On that point from Garratt, the retailer shared updates on plans for the rest of the fiscal year that extends to Feb. 3, 2023. Dollar General plans to execute 2,980 real estate projects throughout FY2022 and is on track for 1,110 new store openings, 1,750 remodels and 120 store relocations.