Shares of Dollar General (DG) plummeted in pre-market trading on Thursday after the company slashed its FY24 forecast. The discount store retailer reported earnings of $1.70 per share in the second quarter, a significant decline of 20.2% year-over-year. This was below analysts’ expectations of earnings of $1.79 per share.
The retailer generated net sales of $10.2 billion, an increase of 4.2% year-over-year but still fell short of Street estimates of $10.4 billion. The company’s same-store sales inched up by 0.5% in the second quarter, further disappointing investors.
DG’s Management Admits that Its Core Customer is “Constrained”
Todd Vasos, Dollar General’s CEO, commented on the lackluster results by acknowledging the financial strain on the company’s core customers. He commented, “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.”
DG Announces Quarterly Dividend and Stock Buyback Policy
Despite the challenging quarter, the company’s Board of Directors declared a quarterly cash dividend of $0.59 per share on its common stock, payable on or before October 22 to shareholders of record on October 8, 2024. However, DG did not buy back any shares in the second quarter. Additionally, the total remaining authorization for future stock repurchases was $1.4 billion at the end of the second quarter.
Dollar General Slashed Its FY24 Outlook
Looking ahead, DG lowered its FY24 outlook. The company now expects net sales to grow in the range of 4.7% to 5.3% in FY24, down from its prior forecast of between 6% and 6.7%. Furthermore, same-store sales are forecast to increase in the range of around 1% to 1.6%, compared to its prior expectation of a rise of 2% to 2.7%.
The company also lowered its earnings forecast to a range of around $5.50 to $6.20 per share, below its prior estimate of $6.80 to $7.5 per share.
Is DG a Good Stock to Buy Right Now?
Analysts remain cautiously optimistic about DG stock, with a Moderate Buy consensus rating based on eight Buys, 10 Holds, and one Sell. Over the past year, DG has declined by more than 15%, and the average DG price target of $146.24 implies an upside potential of 18.1% from current levels. These analyst ratings are likely to change following DG’s results today.
