Dollar General Corp. cut its full-year profit and sales forecasts on Tuesday and warned that proposed tariffs on Chinese imports could begin to have a greater impact on its business and customers.
The company topped estimates for the third quarter when excluding a five-cent-per-share impact from hurricanes Florence and Michael, but it reported that the fallout had increased costs and would continue to do so.
Impact Of Trade War
The company – one of America's biggest discount chains – reported that it had taken steps to minimise the impact of trade tensions on prices, but warned that if Washington followed through on threats to raise tariffs to 25%, it was likely to hurt more.
The company imports 5% of its merchandise, and much of that is from China, and it reported that many vendors also have supply deals with the country, making the entire supply chain vulnerable to higher tariffs.
"There can be no assurance we will be successful in our efforts to mitigate these impacts in whole or in part," the company reported.
Few US retailers have made much of the trade war so far, playing down the impact on their bottom lines, but with the US economy showing signs of flagging, it would add to a growing list of headaches.
Like several other retailers, Dollar General also flagged higher freight costs, as a shortage of truck drivers, new driver regulations and higher fuel prices made moving freight much costlier.
Profit Forecast
The company cut its full-year profit forecast to $5.85-$6.05 per share from the prior forecast of $5.95-$6.15 per share, falling well below analysts' average estimate of $6.11, according to IBES data from Refinitiv.
It also lowered its full-year sales growth forecast to the bottom end of its prior forecast range of a 9%-9.3% increase.
The disappointing forecast overshadowed better-than-expected quarterly same-store sales, bolstered by strong sales of fast-moving consumable goods, as well as its seasonal and home offerings.
Shares of the company, which have risen by 20% this year, fell about 7%, to $104, in pre-market trading.
Same-store sales at the retail chain rose by 2.8% for the quarter ended 2 November, topping the 2.43% increase forecast by analysts.
Net income rose to $334.14 million (€293 million), or $1.26 per share, from $252.53 million (€221.4 million), or 93 cents per share, a year earlier.
Excluding hurricane-related expenses, the company earned $1.31 per share in the quarter, topping the Wall Street estimate of $1.26 per share.
