Shares of Dollar General (DG) tumbled as much as 6.9% in premarket trading on Thursday after the company posted weak results for the third quarter. The budget retailer missed expectations for sales and profit, and offered a downbeat outlook.
Here are three things to know about Dollar General’s Q3 results:
1. $5.32 Billion in Net Sales; 84 Cents a Share Earnings
Dollar General posted $5.32 billion in net sales and earnings of $235.3 million, or 84 cents per share. Both figures failed to meet Wall Street’s forecasts for $5.37 billion in sales and earnings of 93 cents per share.
In the third quarter of 2015, Dollar General posted earnings of $253.3 million, or 86 cents per share.
The company blamed its weak results on a reduction in food stamp benefits and lower food prices.
Changes to the SNAP program criteria have hit discount stores particularly hard. The changes, expected to be fully implemented by the end of 2016, will likely cause 1 million Americans to lose their benefits.
States implementing SNAP changes include: Alabama, Georgia, Florida, and Tennessee. These states have some of the highest concentrations of Dollar General stores.
2. Same-Store Sales Fell 0.1%
Same-store sales declined by 0.1% in the third quarter, confounding expectations of a 0.8% increase.
Rival Dollar Tree Inc. (DLTR) said last week that its same-store sales for the third quarter were up by 1.7%, surpassing estimates of a 1% increase.
3. Profit Outlook is Lower
Dollar General said it expects earnings per share for the year to grow at the lower end of its 10%-15% range.
Todd Vasos, Chief Executive of Dollar General, said the company cutting prices to increase store traffic and improve performance. While some stores will see results early on, Vasos warned that the full same-store sales benefit will not be seen immediately.
