© Reuters. FILE PHOTO: People exit a Dollar General store in Mount Rainier, Maryland, U.S., June 1, 2021. REUTERS/Erin Scott
(Reuters) -Dollar General Corp forecast sales and profit for 2022 above estimates on Thursday, as higher prices of everyday essentials make more Americans frugal and turn to discount stores for their groceries and household supplies.
The company’s shares rose about 6% in premarket trading as the discount store operator also raised its quarterly cash dividend by 31%.
U.S. discount stores have seen store traffic remain steady as people gradually resume their pre-pandemic life after an Omicron-led pause and go back to buying more discounted goods.
Analysts have said Dollar General (NYSE:) has maintained pricing when people are reining in their spending, while Dollar Tree (NASDAQ:) recently unveiled a plan to raise product prices to $1.25 from $1. Dollar General is also opening more Popshelf stores aimed at wealthier customers who enjoy a treasure-hunting experience.
The pandemic-led trend of cooking at home has also sustained even as coronavirus-related curbs have eased due to people spending less at restaurants, helping grocery sales at discount stores that benefited during lockdowns.
Dollar General forecast fiscal 2022 net sales to increase about 10%, while analysts on average expect growth of 7.5%, according to IBES data from Refinitiv. The company also projected profit growth of about 12% to 14%, versus estimates of 9.3%.
That compares to dull sales forecast from its rival Dollar Tree, which typically sells more non-essentials.
However, Dollar General said it expected a challenging first quarter due to elevated cost pressures, ongoing supply chain disruptions and the waning impact of stimulus checks.
Dollar General expects to earn between $2.25 and $2.35 per share on a same-store sales decline of 1% to 2% for the quarter ending April 29. Analysts expect same-store sales to increase 1% and adjusted earnings of $2.73 for the first quarter.
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