American consumers are “provincially”! “One Dollar Store” Giant DG.US (DG.US) Revised Fiscal Year Profit Guidelines and Exceed Expectations

The Zhitong Finance App learned that US Dale (DG.US) announced that earnings for the third quarter ended October 31 exceeded expectations and raised annual profit expectations. The company is optimistic about strong demand from its discount stores and is committed to cutting costs and reducing inventory-related losses. According to data collected by LSEG, Q3 earned $1.28 per share, up 44% year over year, compared to analysts' expectations of $0.95. Net sales for Q3 were $10.65 billion, slightly higher than the expected value of $10.64 billion. Same-store sales increased 2.5% in Q3, reflecting a 2.5% increase in customer traffic while average transaction volume remained the same.

Gross margin increased 107 basis points to 29.9%, driven by higher inventory mark-up rates and reduced wear and tear, but this increase was partly offset by increased last-in, first-out withdrawals.

Looking ahead, the company expects earnings per share of FY2025 to be between $6.30 and $6.50, above market expectations of $6.14, compared to the previous guidance of $5.80 to $6.30; its same-store sales are expected to increase 2.5% to 2.7% year over year, compared to 2.1% to 2.6%; net sales are expected to grow 4.7% to 4.9% compared to the previous guidance of 4.3% to 4.8%, which means its revenue will reach $42.52 billion to $42.6 billion, more than The market forecast was $42.49 billion.

These predictions cover the 4885 real estate projects the company plans to implement in fiscal year 2025, including opening 575 new stores in the US and as many as 15 new stores in Mexico.

The day before, its competitor Dollar Tree (DLTR.US) also raised its annual profit guidance. Against the backdrop of an unstable US economy and a weak labor market, discount stores are attracting lower- and middle-income groups in the US to seek more affordable options and better seasonal deals.

DAL's product pricing strategy is to keep about 25% of its products at or below $1 to cater to its core customer group—American households with an annual income of less than $35,000. This strategy has also made the company the primary choice for these customers.

The higher-than-expected performance of US discount stores sends a signal that inflationary pressure continues, and consumers (especially low- and middle-income groups, and a growing number of middle class customers) are actively seeking ways to save money. Items at discount stores are usually inexpensive and highly essential. When sales and customer traffic at these stores increase, it's an indication that consumers are highly sensitive to prices.

The CEOs of Dale and Dollar Tree of America mentioned that not only are traditional core customer groups, but even some middle class and wealthy people have begun to shop at discount stores. This shift in consumption across income groups shows that seeking “value maximization” has become a common consumption trend, and even households with better financial conditions are cutting back on unnecessary expenses.

The discount retail industry is inherently defensive. In times of economic slowdown or uncertainty, such companies often outperform the broader retail sector. Strong results suggest that consumer confidence may not be as stable as other macroeconomic indicators suggest, and many households are preparing for a potential economic downturn.

This view also seems to be confirmed by the latest financial reports from Walmart and Target. Earlier, Walmart announced better-than-expected results for the third quarter of fiscal year 2026 and raised its full-year results guidance for the second consecutive quarter, showing that the world's largest retailer continues to grow strongly in an environment of economic uncertainty — the company is attracting more price-sensitive consumers and gaining a larger share of the digital consumer sector. In contrast, Target, whose core customer group is the US middle class, had mixed results in the third quarter. As this large retail company is facing falling product prices and weak demand in key product areas, the decline in same-store sales, a key retail indicator, exceeded market expectations.

Following the announcement of the results, DAL shares in the US rose by about 4% in pre-market trading. The company's stock has risen about 45% since this year.