It’s been a tough year for Dollar General (DG) and Dollar Tree (DLTR) as consumers pinch pennies and uncertainty looms in the road ahead.
“The retail landscape is definitely changing quite a bit. Right now, we have a lot of big winners Walmart, Amazon, and other companies that are struggling,” R5 Capital founder and CEO Scott Mushkin told Yahoo Finance’s Morning Brief.
As shoppers seek value, stores like Walmart (WMT) that have cheap groceries as a draw are grabbing market share. On top of that, President-elect Trump’s potential tariffs could be another hit for the industry.
Both companies reported muted earnings results this week.
Dollar General’s same-store sales grew 1.3% in the third quarter, compared to the 0.97% Wall Street expected. That was driven by an increase in transaction size and a 0.3% boost in foot traffic. Its grocery business continues to attract shoppers while home, seasonal, and apparel segments remain soft.
Its revenue of $10.18 billion beat the $10.14 billion expected. Adjusted earnings came in at $0.89 per share, missing the $0.94 estimate. It expects fourth quarter sales to grow between 1.1% and 1.4% year over year.
Dollar General’s “core customer remains financially constrained,” CEO Todd Vasos said on its Thursday earnings call. Its shoppers are “less able to stretch their budgets at the end of the month,” he added.
Dollar Tree’s same-store sales are up 1.8% from a year ago, beating the 1.38% expected, boosted by an increase in the average ticket and a 1.5% uptick in foot traffic.
Its revenue of $7.56 billion also bested estimates of $7.47 billion. Adjusted earnings per share came in at $1.12, versus estimates of $1.08.
Dollar Tree’s interim CEO Michael Creedon said on the earnings call that there’s ongoing “evidence of belt-tightening, particularly among lower-income customers, and to a lesser extent, among middle- and higher-income families with young children.”
Dollar Tree CFO Jeff Davis said November same-store sales “got off to a slow start” as consumers “defer shopping trips to closely follow the ins and outs of a national election.” The company is also bracing for the impact of a shorter holiday season.
For the fourth quarter, Dollar Tree expects same-store sales growth of low single-digits for both its namesake business and its Family Dollar chain.
The Dollar General convenience store logo is displayed on a truck on Aug. 30, 2024, in Austin, Texas. (Brandon Bell/Getty Images) ·Brandon Bell via Getty Images
Joe Feldman of Telsey Advisory Group said Dollar Tree “continues to make progress on several company-specific initiatives” like offering multiple price points and Family Dollar remodels, as the acquisition remains a headache.
However, he recommends a Hold rating on the stock due to “tough consumer spending trends among the company’s core customers and increased competition from the likes of Walmart.”
The company is also in the midst of searching for a new CEO and CFO.
Former CEO Rick Dreiling resigned in early November, citing health issues. The company announced this week that Davis plans to step down early next year
Forrester Research retail analyst Sucharita Kodali is more optimistic about the company’s future potential, she told Yahoo Finance’s Brad Smith.
“If I had to pick, I’d probably say that Dollar Tree has a little bit of an edge because it’s embarking on a broader tiered pricing strategy to try to bring some of its price points up.”
Shares of both dollar store chains are down more than 40% year to date, compared to the S&P 500’s 27% gain.
In early September, investors fled from Dollar Tree after it missed Wall Street estimates across key metrics for its second quarter and revised down its 2024 outlook.
Dollar Tree now expects 2024 revenue in the range of $30.7 billion to $30.9 billion, compared to $30.6 billion in 2023. It provided a vague same-store sales outlook of low-single-digits.
Similarly, Dollar General posted a miss for its Q2 report in late August that hammered the stock.
For fiscal year 2024, Dollar General expects sales growth of 4.8% to 5.1%, versus the previous range of 4.7% to 5.3%. Same-store sales growth is projected at 1.1% to 1.4%, compared to the previous range of 1% to 1.6%.
Last week, Trump posted on Truth Social that his administration plans to impose an additional 10% tariff on imports from China and a 25% tariff on imports from Mexico and Canada on Jan. 20, his first day in office.
The proposal could hit discount retailers that have limited room to raise prices particularly hard.
Creedon told investors, “It’s still unclear what will make its way to policy.” He added that he believes the team can mitigate risk based on its experience in 2018 and 2019.
The company can “change some of the specs on the product, … negotiate furiously with our suppliers, or they can eliminate the product altogether,” he said.
Dollar General, on the other hand, didn’t mention tariffs during its earnings call.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
