Dollar store chains experience customer decline due to rising prices impacting financially vulnerable individuals

Dollar Tree is revising down its financial projections for the full year as consumers struggle with rising prices and curtail their spending. The company’s shares dropped by over 12% before the market opened on Wednesday, reaching a 52-week low the day before. Not long ago, Dollar General also experienced a significant decrease in its shares after reporting a poor quarter.

Dollar General now anticipates adjusted earnings for the year to be between $5.20 and $5.60 per share, down from the previous estimate of $6.50 to $7 per share. The company also expects annual sales in the range of $30.6 billion to $30.9 billion, a decrease from the initial projection of $31 billion to $32 billion. Analysts surveyed by FactSet predict full-year earnings of $6.56 per share on revenue of $31.17 billion.

Despite attempting to attract customers with low prices, Dollar Tree faces tough competition from major retailers like Walmart and Target who are also implementing price cuts due to financial pressures on their customer base. Dollar Tree’s second-quarter revenue stood at $7.38 billion, slightly lower than the $7.5 billion estimated by analysts from Zacks Investment Research.

In the period ending on Aug. 3, Dollar Tree reported earnings of $132.4 million, or 62 cents per share. Adjusted earnings were 67 cents per share, falling short of the expected $1.03, according to Wall Street. The company’s Chief Financial Officer, Jeff Davis, commented that the lower-than-expected earnings were influenced by economic challenges faced by its middle- and higher-income customers.

Although inflation rates are moderating, many Americans are still grappling with the marked increase in prices for essential items like gas, food, and housing compared to pre-pandemic levels. This situation has led consumers to cut down on nonessential spending to allocate more resources towards necessities like groceries.