Dollar General, Macy’s Fall As U.S. Consumer Further Weakens

Dollar General (DG:US) and Macy’s (M:US) reported weaker-than-expected sales that sent their respective shares lower on Thursday. 

DG saw its same-store sales rise 1.6% in the first quarter, worse than the expected increase of 3.8%. Overall, revenue rose 6.8% to $9.34 billion, again missing the analyst target of $9.5 billion.

On the bottom line, Dollar General reported an operating profit of $740.9 million while analysts were looking for $763.7 million. Shares in the retailer fell as much as 20% on Thursday.

While investors were prepared for results that were impacted by a tough macroeconomic environment, Dollar General said the macro “has been more challenging than expected.” As a result, Dollar General slashed its full-year outlook.

“We are confident in Dollar General's ability to deliver strong growth in the years ahead, despite the near-term pressure which impacted our first quarter sales results and is anticipated to impact our full-year sales and EPS," said Jeff Owen, Dollar General's chief executive officer.

Similarly, Macy’s also cut its full-year forecast after the management said the demand trends further weakened starting in late March.

“During the first quarter, we delivered a solid beat on our gross margin rate and bottom line expectations enabled by our disciplined teams, strength of our inventory management and operational efficiencies. We planned the year assuming that the economic health of the consumer would be challenged, but starting in late March, demand trends weakened further in our discretionary categories,” said Jeff Gennette, chairman and chief executive officer of Macy’s.

The clothing retailer delivered an adjusted EPS of $0.56 on revenue of $4.98 billion. Analysts were looking for earnings of $0.48 per share on revenue of $5.04 billion. 

While Macy’s shares lost 13% earlier that week, the stock pared the majority of losses on Thursday after the CEO said on the earnings call that the company will offer an expanded Nike (NKE:US) selection starting in October.

The drop in Dollar General shares comes after Congressman Daniel Goldman invested $50,000 - $100,000 in the stock on April 10, when it closed at $216.76. DG shares trade about 25% lower on June 1 compared to the first half of April.