Dollar General Spotted a Spending Trend That Points Toward ‘Struggling’ US Consumers

Key Takeaways

• Dollar General’s CEO said that its three softest weeks for second-quarter comparable-store sales were the last weeks of each month. 
• That, he said, suggests trouble stretching budgets to last the month.
• Meanwhile, he said, most of the retailer’s customers say they’re worse off financially than they were half a year ago.

Dollar General (DG) noticed a spending trend in its latest quarter. It doesn’t spell financial health for some U.S. consumers. 

The discount retailer reported second-quarter results Thursday, logging only slim gains in same-store sales for the quarter and scaling back its outlook for them over the balance of the year. CEO Todd Vasos said on a Thursday conference call with analysts that its three softest weeks for second-quarter comparable-store sales were the last weeks of each month. 

“This pattern suggests that our customers are less able to stretch their budgets through the end of the month,” said Vasos in the call, a transcript of which was made available by AlphaSense. “We believe the softer-than-anticipated sales performance in Q2 is at least partially attributable to a core customer that is less confident of their financial position.”

Core Customers Cutting Back on Necessities

Vasos also cited customer surveys: Most Dollar General customers, he said, say they’re worse off financially than they were half a year ago. 

And more than 60% of the company’s “core” customers — households earning less than $35,000 annually — said higher prices have led them to cut back on buying necessities. A quarter said they expect to miss a bill payment in the next six months. 

Plenty of consumer-facing companies have highlighted signs of stress in the consumer economy in recent weeks. In many cases, they’ve suggested that their customers are looking for ways to save without changing broader spending habits — in effect, attempting to stretch their dollars. Walmart (WMT) said it has attracted service-minded higher-income consumers. 

“While middle and higher income households are seeking value as well, they don’t claim to feel the same level of pressure as low income households,” Vasos said. 

 “Our core customer,” he said, is obviously struggling.” 

Read the original article on Investopedia.