Dollar General expects its sales growth in 2013 to be above than of last year’s numbers. The company attributed it to the increased demand for food and other basic commodities that drove gains despite the concerns consumers had regarding the economy.
The company’s fourth quarter profit was better than the forecasts made by analysts despite its lighter-than-anticipated sales growth. Analysts said the results were solid despite the sluggish consumer and challenging environment.
Shares of Dollar General went up 4.9 percent to $52.50 in premarket trading. The shares gained 13.6 percent in 2013 as it surpassed its competitors. Shares of Family Dollar Stores decreased 3.2 percent during the same period. Wal-Mart Stores’ shares were up 8.9 percent.
Dollar General usually does well when economic concerns push consumers on limited budgets to reduce their spending. Most of its merchandise are below $10 and around a quarter of its items are priced at $1 or under.
Wal-Mart has stepped up its focus on items priced at $1 or less. This added more pressure to dollar stores, such as Dollar General. They responded by increasing their advertising and began selling items such as cigarettes to get shoppers visit their stores more often.
Dollar General has more than 10,500 stores in urban and rural parts of the United States. It wants to portray itself as a more convenient store than big-box chains, such as Wal-Mart. Its locations near low-income shoppers have been vital to its bottom line, especially when gasoline prices continue to increase, as consumers want to make shorter trips to reduce their gas spending.
High gasoline prices also placed pressure on Dollar General’s transportation costs. With the tough competition, it could not increase prices to offset the higher costs.
In the fourth quarter that ended February 1, Dollar General earned $317.4 million compared to $292.5 million the previous year. Its sales increased 0.5 percent to $4.21 billion.