Dollar General cuts annual forecasts on weaker discretionary demand; shares down 15%

(Reuters) -Discount retailer Dollar General (NYSE:) cut forecast for annual same-store sales and profit on Thursday, as cost-conscious customers cut back spending on its higher-margin goods to prioritize essential purchases.

Shares of the company plunged about 15% in premarket trading.

Discount store operators have seen sluggish demand for higher-priced categories such as home goods, electronics, toys and apparel as customers focus on shopping for essentials such as groceries.

Despite supply chain costs coming down from its peaks, Dollar General’s margins continued to be pressured by still-high labor costs, as well as increased markdowns and inventory damages.

The company expects fiscal 2024 same-store sales to be up 1.0% to 1.6%, compared with prior forecast of 2% to 2.7% rise.

It also expects annual earnings per share in the range of$5.50 to $6.20, compared with prior forecast of $6.80 to $7.55 per share.