Dollar General and Dollar Tree Beat Estimates, Appealing to Households Looking To Cut Costs

Reuters  |

Image source: Random Retail, CC BY 2.0

(Reuters) - The top two U.S. dollar stores reported better-than-expected quarterly profit on Thursday, as cash-strapped consumers sought more low-price groceries and household items in a coronavirus-induced downturn.

Sales at Dollar General Corp and Dollar Tree Inc remained robust even after the panic-buying surge at the start of lockdowns, as high U.S. unemployment encouraged demand for cheaper priced cereals, vegetables and other daily essentials.

The dollar stores said sales of more discretionary items including clothing were also up, as households spent government stimulus checks carefully.

“Consumer shopping patterns are evolving. Customers are shopping with a purpose, while looking to minimize risk and exposure,” Dollar Tree’s new Chief Executive Officer Mike Witynski said.

Shares of Dollar General rose 1.4% in premarket trading but have turned lower by 10am ET, down 1.3%, as it reported an 18.8% rise in second-quarter same-store sales and beat the average estimate of a 15.1% increase.

Overall same-store sales at smaller rival Dollar Tree were not as strong, rising 7.2%, as it used a larger portion of its shelf space for seasonal and discretionary items such as holiday cards and party supplies, items that have not been of demand during the health crisis.

Dollar Tree’s shares are down 4.7% at 10am ET.

Net income at Dollar General rose 84.6% to $787.6 million, or $3.12 per share, beating market expectation of $2.44 per share, helped by fewer price markdowns.

Dollar Tree’s net income rose 45% to $261.5 million, or $1.10 per share, beating analysts’ average estimate of 92 cents per share.

Reporting by Uday Sampath in Bengaluru; Editing by Arun Koyyur


Source: Reuters

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