(Reuters) -Dollar General ( DG ) forecast annual sales above Wall Street estimates on Thursday, banking on more inflation-affected customers buying its cheaper groceries and essentials and sending its shares surging more than 6% premarket.

With consumers preferring to cook more meals at home amid higher prices and borrowing costs, Dollar General ( DG ) has seen more shoppers visiting its outlets to browse for lower-margin, needs-based goods, over pricier general merchandise.

"With customer traffic growth and market share gains during the quarter, we believe our actions are resonating with customers," CEO Todd Vasos said in a statement.

Vasos's strategy to focus on the basics - like more employee presence at stores, greater customer engagement and expanding private-label brands - has helped stabilize Dollar General's ( DG ) struggling business, which faces stiff competition from Walmart and Chinese ecommerce platform Temu.

The strategy helped the discount retailer forecast 2024 sales to grow between 6.0% and 6.7%, above analysts' estimate for a 4.4% growth to $40.33 billion, according to LSEG data.

The retailer also posted holiday-quarter net sales of $9.86 billion for the fourth quarter, above analysts' average estimate of $9.78 billion.

However, like rival Dollar Tree, Dollar General ( DG ) also projected annual profit below estimates, underscoring margin pressures from higher costs linked to its supply chain, labor and raw materials.

Gross profit as a percentage of net sales was 29.5% for the reported quarter, down from 30.9% last year.

Dollar General's ( DG ) margins have also been pressured by the higher discounts and promotions it offered to clear its excess stock, along with retail shrink, in which inventory is either lost, damaged or stolen.

It expects 2024 profit between $6.80 and $7.55 per share, compared with an estimate of $7.55 per share.

(Reporting by Granth Vanaik and Anuja Bharat Mistry in Bengaluru; Editing by Pooja Desai and Devika Syamnath)