Consumables helped Dollar General Corp. drive sales in the second quarter, but company profits narrowed as discretionary categories suffered declining demand, the retailer reported.
Net income in the second quarter was $374.2 million, or $1.70 per diluted share, versus $468.8 million, or $2.13 per diluted share, in the year-earlier period.
Dollar General fell short of a Yahoo Finance-published analyst consensus estimate on earnings per diluted share, pegged at $1.79, and revenue, pegged at $10.37 billion.
Comparable sales gained 0.5% in the quarter year over year, while net sales Increased 4.2% to $10.21 billion, the company reported. An increase in customer traffic drove comps, partially offset by a decline in average transaction amount, with growth in consumables partially offset by softer results in seasonal, home and apparel. Operating profit was $550 million versus $692.3 million in the year-previous period.
In a conference call, Todd Vasos, Dollar General CEO, said the company isn’t satisfied with its performance despite sales gains, with comps coming in lower than expected. He put the comparable traffic increase at 1% and the average transaction decrease at 0.5%. Inflation, concern about available jobs and elevated interest rates are worrying Dollar General customers, especially lower-income shoppers who form more than half of the Dollar General customer base.
Vasos added the promotional environment has been more intense than the company anticipated when 2024 opened, something Dollar General executives have determined will continue through year’s end and translate into more markdowns.
Still, Vasos did see positive developments in the quarter.
“We made important progress on our ‘Back to Basics’ plan in the second quarter,” he said. “However, despite advancing several of our operational goals and driving positive traffic growth, we are not satisfied with our financial results, including top-line results below our expectations for the quarter. While we believe the softer sales trends are partially attributable to a core customer who feels financially constrained, we know the importance of controlling what we can control. With the evolving retail and consumer landscape in mind, we are taking decisive action to further enhance our value and convenience offering, as well as the in-store experience for our associates and customers.”
Vasos said Dollar General has historically been able to serve “customers in a variety of macroeconomic environments, and we believe the actions we are taking will allow us to further strengthen our position and build on our ‘Back to Basics’ progress, as we seek to deliver sustainable growth and long-term shareholder value.”
