DOLLAR GENERAL ALARM

Theft, inflation woes

Even dollar stores are getting slammed by the retail theft crisis.

Dollar General’s shares tanked Thursday after the discounter provided a bleak outlook for the rest of the year because of rising thefts and weak consumer demand at its 19,000 stores nationwide.

The Tennessee-based company warned Wall Street that profits may plunge by as much as 34% compared to its previous forecast for an 8% decline as flat growth has cut its full-year profit and sales targets for the second time this year.

“Our revised guide is really a function of the slower transactions that we’re seeing, and higher-than-expected shrink,” Dollar General CFO Kelly Dilts said on a call with analysts after the company reported quarterly earnings that fell short of Wall Street estimates.

The reference to “shrink” — an industry term for stolen or damaged goods — follows a troubling trend cited by other major retailers, who have blamed the scourge of organized retail theft for cutting into their bottom line.

Target has said it expects to lose $500 million because of theft at its stores.

Dollar Tree said in May it would need to raise prices in some regions because of persistent shoplifting.

Dollar General’s gross profit as a percentage of net sales fell 126 basis points in the quarter as retail shrink worsened. It flagged $100 million in additional shrink headwinds since its last earnings call in June.

Blame inflation

CEO Jeff Owen did not elaborate on the extent of the theft, instead pointing to still-stubborn inflation for shoppers feeling “financially constrained.”

“Dollar General’s core customers are feeling the acute pressure of the costof-living-crisis,” echoed Neil Saunders, retail analyst and managing director at GlobalData, in a report Thursday.

Dollar General lowered its same-store sales guidance to -1% to +1%, compared to its previous forecast of +1% to +2%.

The company’s comparable sales dropped by 1% in the second quarter ended Aug. 4, and the company expects a pileup of inventory to be a drag on its earnings for the rest of the year as it slashes prices on items that haven’t been selling.

The quarter “marks the fourth consecutive guide down for Dollar General, which admittedly creates further uncertainty if we are hitting the bottom yet,” said Raymond James analyst Bobby Griffin.

The stock nose-dived more than 12% Thursday to close at $138.59.