Dollar General forecasts tepid sales, profit as costs surge

(Reuters) -Dollar General Corp on Thursday forecast annual sales and profit largely below expectations as the discount retailer battles higher costs triggered by the pandemic, sending its shares down 3%.

Spiraling freight costs, shipping delays and other supply-chain snarls at a time when labor and raw materials are getting costlier have pinched profit outlooks at dollar stores that already operate on razor-thin margins.

Rival Dollar Tree Inc also forecast holiday-quarter profit below expectations last week and raised its pricing point to $1.25 for most items at its namesake stores to boost margins.

Goodlettsville, Tennessee-based Dollar General narrowed its fiscal 2021 sales growth forecast to between 1% and 1.5%, the midpoint of which was below expectations.

It’s full-year earnings forecast of $9.90 to $10.20 per share was also largely below analysts’ average estimate of $10.20, according to Refintiv IBES data.

The company also announced plans for an international expansion for the first time, saying it expects to open up to ten stores in Mexico by the end of fiscal 2022.

Net sales rose to $8.52 billion in the third quarter ended Oct. 29, marginally above analysts’ expectations, from $8.20 billion a year earlier.

(Reporting by Mehr Bedi in Bengaluru; Editing by Shinjini Ganguli)