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Dollar General sales miss as consumer spending stays sluggish

Source: Dollar General | Facebook

Dollar General, the No.2 U.S. discount retailer by store count, reported lower-than-expected quarterly net sales as consumer spending showed few signs of recovery.

U.S. consumer spending barely rose in September and October, inching up just 0.1 percent each, as consumers chose to save more, according to the Commerce Department.

Dollar General said on Thursday that its same-store sales rose 2.3 percent in the third quarter. The growth was slower than the 2.7 percent expected by analysts polled by research firm Consensus Metrix.

Shares of the company, which increased its share buyback program by $1 billion, rose 1 percent to $66.06 in premarket trading.

Dollar General said it was adopting "zero-based budgeting" - wherein companies plan expenses for a period from scratch instead of basing their budgets on previous data - to cut costs.

Zero-based budgeting has become popular with food companies in recent months, with Mondelez International Inc and Kellogg Co being among those that have adopted it.

Dollar General's performance contrasts that of Dollar Tree Inc, which reported better-than-expected quarterly sales last week. The largest U.S. discount retailer said that higher rents, taxes and healthcare costs were pushing low-income Americans to rein in expenditure and shop at discount stores.

Dollar General's net sales rose 7.3 percent to $5.07 billion in the quarter ended Oct. 30, but missed the average analyst estimate of $5.09 billion, according to Thomson Reuters I/B/E/S.

The retailer said it expected sales to grow about 8 percent in the year ending January. Dollar General had earlier forecast 8-9 percent growth.

Dollar General also cut its full-year same-store sales growth forecast to 2.5-2.8 percent from 3.0-3.5 percent.

Its net income rose 7.2 percent to $253.3 million, or 86 cents per share. Excluding items, Dollar General earned 88 cents per share, beating analysts' expectations by 1 cent.

The company also named interim Chief Financial Officer John Garratt permanently to the post.