By Ananya Mariam Rajesh
(Reuters) -Dollar General Corp on Thursday forecast full-year profit well below expectations after cutting its earnings estimate for the all-important holiday quarter on heavy discounts, higher costs and inventory damage due to winter storm Elliott.
Shares of the top U.S. dollar store fell about 4% in early trade. Rival Dollar Tree’s shares slipped about 2%.
With consumer prices, rental housing and food costs still rising, U.S. retailers are increasingly becoming more cautious about their outlooks for the year.
Walmart Inc and Home Depot Inc earlier this week projected annual earnings below estimates.
Dollar General forecast fiscal year 2023 profit to rise between 4% and 6%, compared to estimates of a 10.6% increase, according to Refinitiv IBES data.
U.S. companies are also battling higher freight, labor and other supply chain-related costs while being forced to offer deep markdowns to clear excess inventory.
The weak forecast could be due to continued supply chain issues, said Edward Jones analyst Brian Yarbrough.
In December, Dollar General flagged “inefficiencies” in its supply chain due to unexpected delays in acquiring additional warehouse space to store inventory, coupled with the early arrival of seasonal merchandise.
The company expects fourth-quarter earnings per share to be between $2.91 and $2.96, compared with earlier expectation of $3.15 to $3.30.
Dollar General’s grocery and food business is also under pressure as larger rivals such as Walmart and Kroger Co gain more market share.
The company also blamed the cut to lower sales and higher inventory damages due to winter storm Elliott, which pounded the heart of the United States in December bringing heavy snow, freezing rain and destructive tornadoes.
Dollar General is expected to post its results on March 16 for the three months ended Feb. 3.
(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Savio D’Souza and Sriraj Kalluvila)
