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Dollar General warns of dropping sales, uncertain of stimulus impact

Dollar General warns of dropping sales, uncertain of stimulus impact

FILE PHOTO: A sign is seen outside a Dollar General store in Chicago, Illinois, U.S. May 23, 2016. REUTERS/Jim Young

REUTERS: Dollar General indicated on Thursday (Mar 18) the vaccine rollout and a reopening economy would lead to a bigger-than-expected slowdown in sales for discounted groceries, while a new round of stimulus may be tougher to take advantage of than before.

The company's shares fell over 6per cent as it also forecast full-year profit below estimates.

The promise of a return to relative normalcy later this year as more Americans get inoculated against COVID-19 has made the boom in pantry stocking, which made Dollar General one of the bigger retail beneficiaries of the health crisis, unlikely to be repeated.

A new round of US$1,400 stimulus payments, on the way to mostly lower- and middle-income households, was expected to boost spending at discount stores, at least in the coming weeks, but Dollar General said there was too much uncertainty about how much the company could benefit to include it in its outlook.

"Compared to the previous stimulus rounds, which helped us, the economy is now opening up more. We are competing with other segments of the economy outside of retail for that share of wallet, so how much we get is uncertain," finance chief John Garratt said on a call with analysts.

Dollar General said it expects full-year same-store sales to fall 4 per cent to 6 per cent, compared with estimates of a 1.2 per cent decline, according to IBES data from Refinitiv. The company forecast overall net sales to be flat to 2 per cent lower, compared with estimates of a 1.4 per cent increase.

The company forecast annual earnings per share of US$8.80 to US$9.50, below estimates of US$10.08.

Same-store sales in the fourth quarter rose 12.7per cent, beating analysts' estimate of a 10.7per cent increase, helped by the US$600 stimulus checks that boosted spending.

Net income rose about 20 per cent to US$642.7 million, or US$2.62 per share, but missed estimates of US$2.72 per share.

Source: Reuters

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