Dollar General Corporation ( DG ) shares are trading lower in premarket on Thursday following disappointing second-quarter earnings and a downward revision to its fiscal year 2024 outlook.

The retail behemoth reported second-quarter earnings per share of $1.70, missing the analyst consensus of $1.78. Quarterly sales of $10.21 billion (+4.2% year over year) missed the street view of $10.368 billion.

Dollar General ( DG ) reported a 0.5% increase in same-store sales, driven by an increase in customer traffic, partially offset by a decrease in average transaction amount. However, operating profit declined by 20.6%, reaching $550.0 million.

“Despite advancing several of our operational goals and driving positive traffic growth, we are not satisfied with our financial results, including topline results below our expectations for the quarter,” said Todd Vasos, Dollar General’s chief executive officer.

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In the second quarter, gross margin was 30.0%, down from 31.1%, representing a decrease of 112 basis points year over year. This decline in the gross profit rate was primarily due to increased markdowns, higher inventory damages, a larger share of sales from the consumables category, and rising shrinkage.

Despite the drop in profitability, the company generated $1.7 billion in year-to-date cash flows from operations.

“While we believe the softer sales trends are partially attributable to a core customer who feels financially constrained, we know the importance of controlling what we can control,” the CEO added.

As of August 2, total merchandise inventories, at cost, were $7 billion compared to $7.5 billion as of August 4, 2023, a decrease of 11.0% on a per-store basis.

“With the evolving retail and consumer landscape in mind, we are taking decisive action to further enhance our value and convenience offering, as well as the in-store experience for our associates and customers.”

Dollar General ( DG ) exited the quarter with cash and equivalents worth $1.22 billion. As of quarter-end, the company’s long-term obligations totaled $6.24 billion.

Dividend: On August 28, the company declared a quarterly cash dividend of 59 cents per share on the company’s common stock, payable on or before October 22, to shareholders of record on October 8.

Outlook: Dollar General ( DG ) has revised its fiscal year 2024 outlook, lowering its EPS forecast from a range of $6.80 to $7.55 to a new range of $5.50 to $6.20, compared to the $7.12 estimate.

The company also reduced its revenue forecast from $41.01 billion to $41.28 billion to a revised range of $40.51 billion to $40.74 billion, against the $41.02 billion estimate.

Dollar General ( DG ) continues to expect 2,435 real estate projects, including 730 new store openings, 1,620 remodels, and 85 store relocations in FY24.

Price Action: DG shares are trading lower by 25.1% to $92.80 at last check Thursday, in the premarket session.

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