(Bloomberg) -- In case there was any doubt, the lower-income US consumer is in full retreat.

Dollar General Corp.’s shares plunged 21% — the most on record — after the discount retailer slashed its annual profit forecast, citing rising economic pressures on its shoppers.

The deteriorating outlook underscores the worsening picture for Dollar General’s customer base of lower-income shoppers, who like many US consumers are shifting their spending to basic goods and cutting back on discretionary purchases. Rival discount chain Dollar Tree Inc. cut its own profit outlook last week, and bigger retailers such as Target Corp. have warned of weakening sales trends. 

Chief Executive Officer Jeff Owen laid out a series of challenges to lower-income consumers, from food inflation to the removal of the child-tax credit and higher interest rates. 

“Unfortunately, our customers are saying they’re having to rely more on food banks, savings, credit cards,” Owen said in a call with analysts. Chief Financial Officer Kelly Dilts said the company expects “this customer to remain under pressure for the foreseeable future.” 

The company warned that adjusted earnings are likely to fall this year, abandoning its previous outlook for moderate gains. Same-store sales growth, a key metric for retailers, will rise by as little as 1% instead of the expansion of at least 3% that Dollar General had forecast in March.

During the current fiscal year, which ends in early 2024, earnings will be flat to down 8%, Dollar General said, ditching its previous forecast for growth of as much as 6%. Sales will climb no more than 5%, down a percentage point from the high end of the earlier outlook. The forecast assumes no share repurchases. The company had previously anticipated buybacks of about $500 million. 

Including Thursday’s drop, Dollar General shares have declined about 35% this year, while the S&P 500 Index has gained about 9%. 

Competitive Pressures

The weaker outlook is probably a sign of tougher competition in addition to stressed consumers, Rupesh Parikh, an analyst at Oppenheimer & Co., said in a note to clients. 

Walmart Inc. has been scoring big gains in US comparable sales in recent quarters, a sign that it’s grabbing market share. Dollar Tree is in the middle of a revamp led by Dollar General’s former CEO. 

“It appears to us that the top-line weakness is driven by both macro and competitive shifts,” Parikh said. 

Dollar General, which has been aggressively adding new locations for years, pared its goal for new store openings to 990, down from 1,050 previously. That’s driven by fewer openings of the company’s new Popshelf concept, which is aimed at more affluent suburban customers. The Goodlettsville, Tennessee-based company has more than 19,000 locations and a particularly strong presence in rural areas. 

In the fiscal first quarter, which ended in early May, Dollar General’s adjusted earnings fell to $2.34 a share, trailing the $2.40 average of analyst estimates compiled by Bloomberg. Sales climbed 6.8% to $9.34 billion. Analysts had projected $9.5 billion. 

(Updates shares, adds details from conference call.)

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