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Dollar General cuts annual profit forecast as costs surge

Dec 1 (Reuters) – Dollar General Corp (DG.N) on Thursday cut its annual profit forecast after missing expectations for quarterly earnings, signaling rampant cost pressures were weighing on the discount store chain’s margins, sending its shares down 5% premarket.

Freight, labor and other supply chain-related costs have jumped for U.S. retailers, while excess inventory levels have also forced them to offer deep discounts to spur demand.

Tennessee-based Dollar General said unexpected delays in acquiring additional warehouse space to store its inventory resulted in higher-than-expected distribution and transportation costs in the third quarter.

Gross margin dropped 27 basis to 30.5% in the reported quarter.

Rival Dollar Tree Inc (DLTR.O) had last month cut its full-year profit forecast for the second time, citing planned price cuts and weak demand for higher-margin discretionary goods.

Dollar General now expects fiscal 2022 earnings per share to increase about 7% to 8%, compared with its prior outlook of a rise of about 12% to 14%.

The company reported a profit of $2.33 per share for the third quarter ended Oct. 28, missing analysts’ average estimate of $2.54, according to Refinitiv IBES data.

Dollar General, however, said its annual same-store sales would be toward the upper end of its previously expected range of 4% to 4.5%, after topping same-store sales estimates for the reported quarter.

Reporting by Granth Vanaik and Deborah Sophia in Bengaluru; Editing by Shounak Dasgupta abd Sriraj Kalluvila

Our Standards: The Thomson Reuters Trust Principles.

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