Dollar General raises sales forecast as Americans turn to cheaper shopping

May 26 (Reuters) – Dollar General Corp (DG.N) raised its sales forecast for the year on Thursday, as more Americans turn to discount store shopping with inflation at a four-decade high.

Shares of the company rose 9% in premarket trading. They had lost a fifth of their value last week after downbeat earnings from bigger rivals Walmart Inc (WMT.N) and Target Corp (TGT.N).

With prices of essentials soaring and no federal stimulus payments that were offered to boost the economy after a pandemic-led slowdown, many Americans are opting for cheaper tissues, cereals and disinfectants.

Even customers who typically steer clear of dollar stores could turn to them, as they did during the financial crisis of 2008, Wall Street brokerages have said.

The discount store operator forecast a 3% to 3.5% increase in fiscal 2022 same-store sales compared with its prior outlook of a 2.5% rise. Analysts on average were expecting growth of 2.3%, according to IBES data from Refinitiv.

The company reaffirmed its forecast for fiscal 2022 earnings per share, as sales of consumables with low gross margins such as paper, food and cleaning products have increased.

“Despite ongoing headwinds due to supply chain pressures and heightened inflation, we remained focused on controlling what we can control and delivered solid financial results,” Dollar General Chief Executive Officer Todd Vasos said.

Same-store sales fell 0.1% for the first quarter from a year earlier, compared with Wall Street expectation of a 1.3% drop.

Net income for the quarter fell 18.5% to $552.7 million, or $2.41 per share.

Reporting by Praveen Paramasivam in Bengaluru; Editing by Shinjini Ganguli

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