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HomeStock MarketDollar General forecasts strong 2022 as Americans turn frugal By Reuters

Dollar General forecasts strong 2022 as Americans turn frugal By Reuters

© Reuters. FILE PHOTO: People exit a Dollar General store in Mount Rainier, Maryland, U.S., June 1, 2021. REUTERS/Erin Scott

By Ananya Mariam Rajesh and Praveen Paramasivam

(Reuters) – Dollar General Corp (NYSE:) on Thursday forecast sales and profit for 2022 above estimates, as higher prices of everyday essentials make more Americans frugal and turn to discount stores for their groceries and household supplies.

U.S. discount stores have seen improving store traffic, as people gradually resume their pre-pandemic life after an Omicron-led pause.

The pandemic-led trend of cooking at home, however, has sustained as restaurants have raised prices, keeping grocery sales elevated. Dollar General, in particular, has been adding fresh produce to more stores, while also doubling down on frozen and refrigerated categories.

It also said products priced $1 or less form one-fifth of its assortment, while rival Dollar Tree (NASDAQ:) recently raised product prices to $1.25 from $1.

“Our customer runs out of money before that month runs out. And that $1 bridges that last few days for her, always has, and that continues to do so,” Chief Executive Officer Todd Vasos said during an earnings call.

Dollar General forecast fiscal 2022 net sales to increase about 10%, while analysts on average expect growth of 7.5%, according to Refinitiv IBES. It also projected profit growth of 12% to 14%, versus estimates of 9.3%.

That compares to dull sales forecast from Dollar Tree, which typically sells more non-essentials.

“There’s no question that Dollar General has significantly outperformed Dollar Tree from an execution standpoint,” Truist Securities analyst Scot Ciccarelli said.

Dollar General’s shares, however, pared premarket gains to trade 3% higher as cost pressures, supply disruptions and waning impact of stimulus checks prompted it to forecast a downbeat first quarter.

It expects to earn between $2.25 and $2.35 per share and same-store sales to decline 1% to 2% for the quarter ending April 29. Analysts expect same-store sales to increase 1% and adjusted per-share earnings of $2.73.

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