Dollar General flags profit margin squeeze from holiday discounts, shares fall

(Reuters) -Dollar General on Thursday forecast annual sales largely above Street estimates as the discount retailer benefits from improving demand for essentials and laid out plans to remodel its stores to address concerns over customer experience.

The dollar-store chain operator will fully remodel roughly 2,000 old outlets and incrementally remodel another 2,250 stores in the fiscal year ending January 2026. This compares to the about 1,600 remodels outlined for the current year.

Dollar stores have been ceding ground to big-box retailers including Walmart (NYSE:WMT ), with customers complaining about messy shelves and too much inventory.

Dollar General (NYSE:DG ) posted third-quarter net sales of $10.18 billion, beating analysts' average estimate of $10.15 billion, according to data compiled by LSEG.

CEO Todd Vasos said while its core customer base remained financially constrained, sales improved in the quarter due to better execution and the customer experience at its stores.

Its shares were up about 1% in premarket after having fallen about 40% this year.

"The fact that results have sequentially stabilized relative to a highly challenged second quarter, is supporting the stock early on," said Michael Montani, analyst with Evercore ISI.

He added that hopes of the remodeling plans enhancing the store experience was also a positive.

The company, like its main rival Dollar Tree (NASDAQ:DLTR ), also signaled that traffic to stores had improved in the third quarter along with shoppers buying more on average per trip.

Dollar General, which has about 19,000 stores in the U.S., said it aimed to open about 575 new stores in fiscal 2026. It has set a target of 730 store openings for this year.

The company now expects annual net sales to rise between 4.8% and 5.1%, compared with analysts' estimates of 4.77%, as per data compiled by LSEG.



Still, Dollar General trimmed the upper end of its annual profit forecast and said it includes the impact of hurricane-related expenses of $32.7 million in the third quarter.

The company's earnings of 89 cents per share in the quarter ended Nov. 1 missed estimates of 94 cents.

Source: Investing.com