Retailer Dollar General Corp (DG.N) reported lower-than-expected sales for the holiday quarter on Thursday, blaming weak consumer confidence among its low-income shoppers, cold weather and aggressive competition.
Its forecast for the new fiscal year also disappointed, and shares fell 3.4 percent to $57.30 in afternoon trading.
A bright spot was the sale of tobacco products, which Dollar General started carrying in mid-2013, but the discount chain said its customers are generally still pinching their pennies.
"Our core customer doesn't feel she is out of the woods yet economically, and continues to be cautious with her spending," Chief Executive Rick Dreiling told analysts on a conference call. He cited cuts in government assistance plans, such as food stamps, among factors hitting low-income customers.
Dollar General follows Wal-Mart Stores Inc (WMT.N), Target Corp (TGT.N), Kohl's Corp (KSS.N) and other retailers catering to lower-income shoppers in reporting tepid numbers in what analysts have called a particularly competitive holiday season.
Sales in the fourth quarter ended on January 31 rose 6.8 percent to $4.49 billion. Analysts on average were expecting $4.62 billion, according to Thomson Reuters I/B/E/S.
Sales at stores open at least a year rose 1.3 percent, while Wall Street thought they would increase 4.5 percent. Without tobacco, same-store sales would have been unchanged.
Still, tobacco products, while offering a smaller gross profit margin than other products, are bringing in more shoppers, and more of them are buying other products when they come in to a Dollar General store, executives said on the call.
Last month, CVS Caremark Corp (CVS.N) said it would stop selling tobacco products this year, which analysts said would help convenience stores, and to a lesser extent, dollar stores. Dreiling said he expects some benefit from the CVS decision.
Earnings rose to $322.17 million, or $1.01 per share, from $317.4 million, or 97 cents per share, a year earlier.
Dollar General expects same-store sales to be up 3 percent to 4 percent this fiscal year. It forecast a profit of $3.45 to $3.55 per share, while analysts expected $3.69.
(Reporting by Phil Wahba in New York; Editing by Lisa Von Ahn and Nick Zieminski)