Dollar General raised its annual targets after beating estimates for quarterly profit and sales, in sharp contrast to other retailers cutting financial targets and sounding caution on consumer spending due to tariffs. The company's shares were up 14% in premarket trading.
Dollar stores have historically stood a better chance to weather out tougher economic conditions as consumers shop for cheaper goods at these outlets to stretch their budgets.
Dollar General has also focused on a leaner store count and remodeling existing stores to help improve operations and cut costs at a time when its core lower-income consumer is under some pressure from still-high inflation.
"While traffic declines are a bit concerning and the ticket increase may have been boosted by price increases, we think this is Dollar General's best quarter since the early pandemic," Truist Securities analyst Scot Ciccarelli said in a note.
Dollar General now expects annual same-store sales growth between 1.5% and 2.5%, compared with its prior target of 1.2% to 2.2%. It also raised the low end of its annual earnings per share target by 10 cents to $5.20, keeping the top end unchanged at $5.80.
Some portion of the company's private brand products are exposed to tariffs currently in place on countries including China. Dollar General said on Tuesday it expects to mitigate most of the impact to its cost of goods from these levies.
The Goodlettsville, Tennessee-based company's same-store sales for the three months ended May 2 grew 2.4%, topping estimates of a 1.41% rise, according to data compiled by LSEG.
Its first-quarter earnings per share of $1.78 also handily beat Street expectations of $1.48.
Despite the results, Dollar General acknowledged tariff-fueled uncertainty that looms over the rest of the year and consumer spending could be pressured by tariff-related price increases.
Rival Dollar Tree, which offloaded the Family Dollar chain earlier this year, reports first-quarter results on Wednesday.