Dollar General forecasts bleak profit view as transport, raw material costs bite

[August 26, 2021]  (Reuters) -Dollar General Corp on Thursday forecast full-year profit below analysts' estimates, as transportation and raw material costs pinch the discount retailer's margins, sending its shares down over 3% in premarket trading.

Increasing freight costs caused by bottlenecks at ports and other global supply-chain disruptions have hit all industries, and could especially torment dollar stores that operate on razor-thin margins as they keep prices as low as possible.

Dollar General said higher transportation costs helped lead to an 80 basis point decline in its second-quarter gross profit margin.

The company said it expects fiscal 2021 earnings per share of $9.60 to $10.20, compared with its prior forecast of $9.50 to $10.20. However, the numbers were still below analysts' average estimate of $10.24, according to IBES data from Refinitiv.

The company's disappointing new profit outlook also comes despite its expectations of a 0.5% to 1.5% rise in full-year sales, compared with a prior forecast of a 1% decline to an increase of 1%.

Same-store sales fell 4.7% in the second quarter ended July 30, beating analysts' average estimate of a 5.1% drop.

(Reporting by Uday Sampath in Bengaluru; Editing by Shinjini Ganguli)

[© 2021 Thomson Reuters. All rights reserved.]

Copyright 2021 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.