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Dive Brief:
As shoppers seek value, Dollar General’s second quarter net sales grew 5.1% year over year to $10.7 billion and same-store sales jumped 2.8%, according to a company release Thursday. Meanwhile, gross profit as a percentage of net sales improved from 30% the year before to 31.3%, driven in part by lower shrink and higher inventory markups.
The company raised its full-year guidance, now expecting net sales growth between 4.3% and 4.8%. Same-stores sales are anticipated to increase between 2.1% and 2.6%.
“Tariffs have begun to result in some price increases,” CEO Todd Vasos told analysts on a call Thursday. However, the executive added that the company has relatively low direct import exposure and a proactive sourcing approach.
Dive Insight:
Value remains a key focus for Dollar General as consumers face worsening sentiment.
“We’re pleased to see growth with customers across all income brackets during the quarter,” Vasos said on the call. “Ultimately, customers across all income brackets are coming to Dollar General as they seek value … With that in mind, we are committed to delivering everyday low prices that are within three to four percentage points on average of mass retailers. While we are pleased that we continue to operate within the targeted price range, we are also focused on maintaining our substantial offering of more than 2,000 SKUs at or below the $1 price point.”
The company’s latest results come a day after an announcement regarding its Labor Day Weekend sales events. The retailer is offerings a series of holiday sales from Thursday to Sept. 5 featuring discounts related to outdoor gatherings.
Dollar General’s same-store sales improvement reflects a 1.5% increase in customer traffic and 1.2% growth in average transaction amount. For the quarter, the retailer opened 204 new stores in addition to remodeling hundreds of existing locations.
The company’s shrink improvement relates in part to a ongoing effort to reduce self-checkouts across the store fleet, outgoing CFO Kelly Dilts added on the call. However, the executive noted that Dollar General has even seen shrink improvement at locations that never featured a self-checkout option, as the company focuses on a variety of other mitigating tactics including SKU rationalization.
“Our focus on reducing shrink has continued to produce positive results, including a healthy year-over-year improvement of 108 basis points in the second quarter,” Dilts said. “We expect shrink to be a continued tailwind throughout the remainder of the year, though to a lesser extent in Q4 as we begin to lap the improvements we made toward the end of last year … And our work around shrink never ends.”
Analysts acknowledged the company’s better-than-expected results, though larger macro headwinds remain in play.
“The company seems to be executing well and making progress on its transformation — transitioning to a mature retailer from a growth retailer, as visible from its decision to slow unit growth, increase its focus on in-store enhancements (e.g., merchandising and remodels), and improve in-store profitability through more effective management of operations and costs,” Telsey Advisory Group analysts said in a note shared with Retail Dive. “Our broader concern remains tariffs and inflation and the related impact on demand trends, especially for Dollar General’s core lower-income customers.”