Americans pushed to negotiate purchases | News, Sports, Jobs

NEW YORK — Dollar Tree and Dollar General reported increased sales in the second quarter as four-decade high inflation drove more customers to bargain chain stores for everything from light bulbs to groceries.

Dollar stores tend to sell items in small quantities, not in large packages, allowing low-income customers to buy a little at a time.

As in previous recessions, high-income shoppers are returning to bargain chains as they negotiate to cut spending where they can.

But Dollar Tree and Dollar General are also grappling with rising costs that are impacting their supply chains. Profits are reduced as shoppers focus on necessities like groceries, which have narrower profit margins.

Dollar Tree, based in Chesapeake, Va., reported second-quarter earnings that beat expectations, although sales were a bit below projections. It cut its profit forecast for the year and cut its sales projections.

Dollar Tree is still trying to incorporate the Family Dollar business it acquired in 2015.

“Inflation is at its highest in decades as shoppers face higher costs for food, fuel, rent and more,” Richard Dreiling, the company’s executive chairman, said in a conference call Thursday. “Supply chains have been strained and inconsistent. Inventory levels are higher across retail and consumer buying habits continue to zigzag.”

Dollar Tree Inc. reported second-quarter earnings of $359.9 million or $1.60 per share for the three months ended July 30. That compares to $282.4 million or $1.23 per share the year before.

Wall Street had forecast earnings of $1.58 per share, according to Zacks Investment Research.

Revenue was $6.77 billion, which was better than last year, but slightly below Wall Street projections.

For the current quarter ending in November, Dollar Tree said it expects revenue of between $6.75 billion and $6.87 billion. Analysts polled by Zacks expected revenue of $6.77 billion.

Comparable store net sales for Dollar Tree increased 7.5%. Family Dollar same-store sales increased only 2.0%.

The company now expects annual earnings of $7.10 to $7.40 per share, with revenue ranging from $27.85 billion to $28.1 billion.

Previously, earnings per share for the full year were expected to be between $7.80 and $8.20. Consolidated net sales for the year were expected to be between $27.76 billion and $28.14 billion.

Neil Saunders, managing director of GlobalData Retail, said the Dollar Tree is a “the story of two companies.”

“The bad company is Family Dollar, which continues its long streak of underperformance,” he said. “At a time when consumers are looking to trade and save money, we think Family Dollar should get much better numbers.”

He said Family Dollar had done nothing to make its stores more attractive and they were offering “a somewhat confusing product selection”. He said the “The dark and depressing environment in many stores is not conducive to attracting or retaining customers, or increasing the average basket size.”

Dollar General Corp., based in Goodlettsville, Tennessee, reported second-quarter net income of $678 million, or $2.98 per share, for the three months ended July 29. That compares to $637 million, or $2.69 per share, in the year-ago period.

The results beat industry analysts’ per-share projections of $2.93.

Revenue was $9.43 billion, which also beat Street’s forecast and topped last year’s $8.65 billion.

The company now expects same-store sales growth of around 4% to 4.5%; between 3% and 3.5%.

Dollar General CEO Todd Vasos said sales of groceries and other consumables were strong, but that was offset by lower sales of discretionary goods. The chain is also seeing more high-income customers in its stores.

More customers are turning to private label products, Vasos said, which tend to be cheaper than national brands.

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