Dollar General clips top end of its profit forecast

(Reuters) - Discount chain Dollar General Corp cut the top end of its full-year profit forecast, citing moderating sales growth and a lower gross profit rate, sending its shares down 5 percent in premarket trading.

The company, which prices most of its merchandise below $10, cut the high end of its earnings forecast range to $3.22 per share from $3.30. The low end is unchanged at $3.15.

Analysts on average were expecting a profit of $3.28 per share, according to Thomson Reuters I/B/E/S.

The company said it expected sales of non-consumable items - higher-margin goods such as home products and apparel - to remain under pressure as frugal customers opt for lower-margin products.

However, Dollar General said it expected same-store sales to increase by 4-5 percent through the year as key initiatives, including the rollout of tobacco products, gain traction.

Same-store sales rose 2.6 percent in the first quarter ended May 3, reflecting growth in the consumables category, which more than offset weak sales of weather-sensitive products.

Net income rose to $220.1 million, or 67 cents per share, in the first quarter, from $213.4 million, or 63 cents per share, a year earlier.

On an adjusted basis, Dollar General earned 71 cents per share, in line with analysts' estimates.

Sales rose 9 percent to $4.23 billion, slightly below market estimates of $4.24 billion.

Dollar General shares closed at $53.55 on the New York Stock Exchange on Monday. They were trading at $50.75 before the bell on Tuesday.

(Reporting By Maria Ajit Thomas in Bangalore; Editing by Saumyadeb Chakrabarty, Maju Samuel)

Source: http://news.yahoo.com/dollar-general-profit-rises-demand-consumables-111316448.html

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