Dollar General saw net sales jump 10.6% to $6.44 billion in Q2 as stronger sales of consumables, seasonal items and apparel offset declines in home goods. The company also raised its fiscal 2018 outlook for net sales to rise between 9% and 9.3%, compared with previous guidance of rising approximately 9%.
The discounter continues to grow rapidly, reiterating that it plans to open approximately 900 new stores in fiscal 2018. It also will remodel 1,000 locations and relocate 100 stores.
Dollar General saw its profits rise 38% to $407.2 million, or $1.52 a share, exceeding analysts’ expectations by $0.03 cents. Dollar General now expects full-year same-store sales growth in the mid-to-high 2% range, compared with its previous estimate in the mid-2% range.
In contrast, chief competitor Dollar Tree reported a profit rise of 16% to $273.9 million, or $1.15 a share, missing analysts’ estimates by a penny. Dollar Tree’s Q2 net sales rose 4.6% to $5.53 billion. However, the company’s Family Dollar banner, which it acquired in 2015, posted flat same-store sales growth, compared with 3.7% growth for both the Dollar Tree banner and Dollar General overall.
To help improve traffic and sales, Dollar Tree is investing in renovating Family Dollar stores — starting with 500 locations this year and a higher target planned for 2019 — as well as raising wages to reduce manager turnover.Dollar Tree raised its expectations for 2018 net sales, but lowered earnings forecasts because of new anti-dumping taxes on some ribbon products from China imposed by the U.S. Department of Commerce.
“Continued strong growth demonstrated by both Dollar General and Dollar Tree in Q2 demonstrates that the value proposition and convenience factor offered by dollar stores resonates well with consumers,” said Mickey Chadha, VP of Moody’s in commentary provided to Retail TouchPoints. “Very good inventory management, relative insulation for e-Commerce, compelling price points and convenience make dollar stores a bright spot in retail overall.”