Dollar General Corp (DG.N) cut its sales and profit forecasts for the year on Thursday as Americans, pinched by higher prices, shopped more for necessities and curbed spending on discretionary items.
The discount retailer, which caters to low-income shoppers, now expects same-store sales to rise 2.4% to 3% for the fiscal year ending January 28, down from its previous forecast of 3% to 5%. It also lowered its adjusted earnings per share forecast to $8.95 to $9.15 from $9.15 to $9.45.
"We are seeing a shift in consumer behavior," said CEO Todd Vasos. "Customers are being more mindful of their spending and are focusing on the basics."
The company's results come as inflation continues to rise in the United States. The Consumer Price Index rose 8.3% in April from a year ago, the fastest pace in 40 years.
The rise in inflation is putting a strain on household budgets, and shoppers are cutting back on discretionary spending. This is hurting retailers like Dollar General, which sell a variety of non-essential items.
Dollar General is not the only retailer that is feeling the pain of inflation. Walmart Inc (WMT.N) and Target Corp (TGT.N) have also cut their profit forecasts in recent weeks.
The rise in inflation is also having a negative impact on the overall economy. The Federal Reserve is expected to raise interest rates several times this year in an effort to combat inflation. This could lead to a recession, which would further hurt retailers.
Analysis
The news that Dollar General is pruning its annual outlook is a sign that the retail industry is facing tough times. The rise in inflation is putting a strain on household budgets, and shoppers are cutting back on discretionary spending. This is hurting retailers like Dollar General, which sell a variety of non-essential items.
The rise in inflation is also having a negative impact on the overall economy. The Federal Reserve is expected to raise interest rates several times this year in an effort to combat inflation. This could lead to a recession, which would further hurt retailers.
It is unclear how long the current economic challenges will last. However, it is clear that the retail industry is facing a difficult period. Retailers that are able to adapt to the changing consumer landscape will be the ones that are most likely to survive.
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