(Bloomberg) -- Dollar General Corp. fell after cutting its profit outlook on higher supply-chain costs and a shift in customer demand to less-profitable consumable products.
Adjusted earnings will increase by no more than 8% in the current fiscal year, down from a prior forecast for growth of as much as 14%, Dollar General said in a statement Thursday. The new guidance trails Wall Street’s estimates even as more shoppers flock to discount stores in the face of relentless inflation.
The shares fell as much as 9.3% in New York, their biggest intraday slump since May. The stock had advanced 8.4% this year through Wednesday, while the S&P 500 index fell 14%.
Dollar General said it’s struggling with a cost squeeze due to “unanticipated delays in acquiring additional temporary warehouse space sufficient for its inventory needs.” The company also cited earnings pressure from its sales mix, as customers are spending more on food and other consumable products, which generally carry lower profit margins.
The supply-chain headaches amount to a “a rare, self-imposed misstep” for the dollar-store chain, Bloomberg Intelligence analyst Jennifer Bartashus said in a report.
The drag from transportation and distribution costs is likely to prove temporary, but it will linger into the current quarter, the retailer said.
Echoing comments from rival Dollar Tree Inc. last week, Dollar General also said it was dealing with headaches from “shrink,” which is retail-industry jargon for inventory lost to theft, damage and administrative error.
(Updates shares in third paragraph.)
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