Discount retailer Dollar General (DG:NYSE) was supposed to thrive during a period of higher interest rates, the rationale being its ultra-low price points would attract a broader cohort of customers during a cost-of-living crisis.

But the company, which caters to more rural areas across the pond, is struggling big time with wage cost pressures, greater markdowns to help shift unpopular products and ‘a core customer who feels financially constrained’, in the words of CEO Todd Vasos.

The shares have dropped 40% year-to-date to $83, with the latest steep plunge triggered by dire second quarter results (29 August). These missed Wall Street expectations on both the top and bottom lines and demonstrated how parts of America are feeling the pinch from high borrowing costs, a softening jobs market and political uncertainty.

With its lower income customer cohort struggling and shrink, an all-encompassing term covering shoplifting, administrative errors and damaged goods, on the rise, the company slashed its sales and profit guidance for the full year.

Dollar General now expects same-store sales to be up 1% to 1.6%, lower than its prior outlook for growth of between 2% to 2.7%, while earnings per share is forecast to be in the $5.50 to $6.20 range compared with management’s previous guidance of between $6.80 to $7.55. 

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