Shares of Dollar General and Dollar Tree popped Thursday, as the discounters beat Wall Street’s quarterly earnings expectations, raised outlooks for the coming year and spoke of consumers flocking to lower prices during inflationary times.
As of midday Thursday, shares of Dollar General were up about 14% and Dollar Tree were up about 20%.
The two retailers said they see opportunity to grow as Americans weigh value more heavily in their purchasing decisions, whether buying groceries or seasonal decor.
“We’re already starting to see our core customers start to shop more intentionally,” Dollar General CEO Todd Vasos said on a call with analysts. And we’re starting to see that next tier of customers start to shop with us a little bit more as well.”
Dollar Tree Executive Chairman Rick Dreiling listed the many challenges that consumers are facing, from the highest levels of inflation since the early 1980s to record high gas prices and uncertainty from current events like the Ukraine war and the pandemic. He added that many consumers “are living paycheck to paycheck.”
“In tough times, value retail can be part of the solution to help families stretch their dollars to meet their evolving needs,” he said.
Dollar General and Dollar Tree beat expectations on fiscal first quarter earnings, revenue and same-store sales.
Dollar Tree, which includes the Family Dollar banner, said it now expects net sales for the year to range from $27.76 billion to $28.14 billion compared with its previous expectations between $27.22 billion to $27.85 billion.
Dollar General said it expects net sales growth of about 10% to 10.5% compared with its previous expectation of about 10%. It raised its same-store sales forecast to growth of approximately 3% to 3.5% compared with its previous expectation of 2.5%.
Here are three major takeaways from the two discounters fiscal first-quarter earnings reports:
A different merchandise mix
Shoppers are still coming to stores, but are buying different items. Food is a bigger part of baskets and drove sales for Dollar General and Dollar Tree in the fiscal first quarter.
A year ago, consumers had extra dollars from stimulus checks and child tax credits. That meant some sprang for impulse items or discretionary purchases. Those dollars have disappeared and other budget items, such as groceries and gas, have become pricier.
Vasos said same-store sales at Dollar General dropped in each of the seasonal, apparel and home products categories in the fiscal first quarter, but more consumables sold. Overall, same-store sales dropped 0.1% versus the year-ago period, besting the 1.3% decline anticipated by analysts, according to FactSet.
At Dollar Tree, carbonated beverages, salty snacks and cookies were some of the items that surged in popularity — especially as the retailer expanded its food and beverage assortment. The company is the parent of Family Dollar, a banner that skews more heavily to food compared with the namesake banner.
“We believe that’s a traffic driver and as the customers experience the items and appreciate the value we’re giving them, over time we believe that that will help drive traffic into the overall store, not just those categories,” Dollar Tree CEO Michael Witynski told analysts.
Seizing the moment
Even before inflation jumped to a four-decade high, Dollar Tree and Dollar General had plans for larger store footprints, expansion into new categories and strategies to woo more customers. The retailers doubled down on that on Thursday — saying the challenged economic backdrop makes the time right and the offerings more compelling.
Dollar General, which has more than 18,000 stores, will open 1,100 new locations this year. It will expand its new store concept, PopShelf, and press ahead with the addition of more health-related merchandise. And it will go global by opening up to 10 stores in Mexico by the end of this year.
The company is going bigger with its stores, too. About 800 of the new locations will be its larger format of 8,500 square feet, with extra aisles for health and beauty items and coolers that hold produce or other groceries, Chief Financial Officer John Garratt told analysts on the call.
Dollar General is adding more end caps and displays that emphasize its cheaper private label and its $1 items, Vasos said. He said the company has “seen an acceleration in our private brand business” in recent weeks.
Dollar Tree, which includes more than 15,500 stores, is opening 590 stores this year. It is adding a larger range of goods by raising the price of $1 items to $1.25 and adding merchandise with a $3 and $5 price tag. And it has brought in new executives to turn around its Family Dollar banner.
Managing higher costs
Dollar Tree and Dollar General weren’t immune to higher costs in the first quarter, and some investors have raised concerns about whether they can keep prices low without hurting profits.
So far, the retailers have managed to beat Wall Street’s earnings expectations despite higher prices of fuel, freight and more. That’s something that Walmart and Target did not do.
Vasos said Dollar General can trade to other items or trade down in sizes if particular goods rise in price. He said the company is closely managing inventory to avoid a high level of markdowns and excess items that don’t sell.
Dollar General has a few other cost-saving and profit-driving measures underway, too. It added self-checkout to more than 8,000 stores as of the end of the first quarter. It plans to turn about 200 stores into self-checkout only this year. It is more than doubling its private fleet of trucks from 2021, so they account for about 40% of its outbound transportation fleet by the end of the year. And it is carrying more health care products, such as cough and cold medication, which have better margins than food.
At Dollar Tree, a price hike has been a big boost for profitability. The retailer announced last year that it would raise the price of dollar items by a quarter. It is rolling out $3 and $5 items to more stores, too.
Witynski said that wider range of price points means new sales opportunities in key seasons, like the holidays. He said Dollar General had strong sales around Easter and Valentine’s Day and anticipates a similar dynamic in the back half of the year with back-to-school, Halloween and the holiday season.
Intel Warns Ohio Factory Could Be Delayed Because Congress Is Dragging Its Feet on Funding
A large chip factory currently in the early stages of being built outside of Columbus, Ohio, could see its scope scaled back or construction delayed depending on what Congress does with the CHIPS Act, Intel said in a statement on Thursday.
The facility was announced in January and would be the most significant expansion of U.S.-based semiconductor manufacturing in years. Intel estimated the plant could cost as much as $100 billion and committed an initial investment of $20 billion.
“We are excited to begin construction on a new leading-edge semiconductor manufacturing plant in Ohio and grateful for the support of Governor DeWine, the state government and all our partners in Ohio. As we said in our January announcement, the scope and pace of our expansion in Ohio will depend heavily on funding from the CHIPS Act,” an Intel spokesperson said in a statement.
“Unfortunately, CHIPS Act funding has moved more slowly than we expected and we still don’t know when it will get done. It is time for Congress to act so we can move forward at the speed and scale we have long envisioned for Ohio and our other projects to help restore U.S. semiconductor manufacturing leadership and build a more resilient semiconductor supply chain,” the statement continued.
The Biden administration has hailed the Ohio factory as an example of the administration’s efforts to increase manufacturing capacity in the U.S. Intel CEO Pat Gelsinger was a guest of Biden’s at the State of the Union earlier this year.
“If you travel 20 miles east of Columbus, Ohio, you’ll find 1,000 empty acres of land. It won’t look like much, but if you stop and look closely, you’ll see a ‘Field of dreams,’ the ground on which America’s future will be built. This is where Intel, the American company that helped build Silicon Valley, is going to build its $20 billion semiconductor ‘mega site’,” Biden said in the speech.
Most manufacturing of high-end chips currently takes place in Taiwan and South Korea, and U.S. officials have said that increasing the amount of semiconductors fabricated on U.S. and European soil is important for national security.
This is breaking news. Please check back for updates.
Original Article: cnbc.com
Supreme Court Strikes Down NY Gun Law Restricting Concealed Carry in Major Second Amendment Case
The Supreme Court on Thursday struck down a New York state law requiring applicants for a license to carry a gun outside of their homes to have a “proper cause” to do so, saying it violated the Second Amendment of the U.S. Constitution.
The 6-3 ruling in the case is a major victory for gun rights advocates who had challenged New York’s restrictive law, which makes it a crime to carry a concealed firearm without a license.
It also represents the Supreme Court’s biggest expansion of gun rights in more than a decade — and casts doubt on laws in eight other states and the District of Columbia that restrict concealed-carry permits in ways similar to New York.
The Supreme Court’s six conservative justices voted to invalidate the law, which has been in existence since 1911. Justice Clarence Thomas wrote the majority opinion in the case, known as New York State Rifle & Pistol Association Inc. v. Bruen.
The court’s three liberals voted to uphold the law. Justice Stephen Breyer wrote a dissent to the ruling.
In his majority opinion, Thomas wrote that New York’s law violated the Constitution’s Fourteenth Amendment — which says citizens have a right to equal protection under the law — because it “prevents law-abiding citizens with ordinary self-defense needs from exercising their right to keep and bear arms” as authorized by the Second Amendment.
The ruling comes weeks after mass shootings at a Buffalo, New York, grocery store, and another in a Uvalde, Texas, elementary school, reignited a national debate about U.S. gun laws.
Democratic elected officials quickly condemned Thursday’s decision, which they said will imperil public safety.
President Joe Biden said he was “deeply disappointed” in the ruling, which he argued, “contradicts both common sense and the Constitution, and should deeply trouble us all.”
Citing the “horrific attacks in Buffalo and Uvalde,” Biden urged states to pass “commonsense” gun regulation “to make their citizens and communities safer from gun violence.”
New York Gov. Kathy Hochul said, “This decision isn’t just reckless, it’s reprehensible.”
Hochul said that because “the federal government will not have sweeping laws to protect us … our states and our governors have a moral responsibility to do what we can and have laws that protect our citizens because of what is going on — the insanity of the gun culture that has possessed everyone all the way up to the Supreme Court.”
New York City Mayor Eric Adams said, “This decision has made every single one of us less safe from gun violence.”
The case was brought by the New York State Rifle & Pistol Association and two of its members, Robert Nash and Brandon Koch, whose applications for concealed-carry handgun licenses for self-defense purposes were rejected.
New York Supreme Court Justice Richard McNally ruled that neither man had shown proper cause to carry guns in public because they failed to demonstrate that they had a special need for self-protection.
The plaintiffs then challenged that denial in a federal court in New York. They argued that the state law governing concealed-carry licenses, which allows them only for applicants with “good moral character” who have “proper cause” to carry guns outside the home, violates the Second Amendment.
After a federal judge in New York dismissed the case, the U.S. 2nd Circuit Court of Appeals affirmed that judgment. The U.S. Supreme Court then took the case.
Thomas, in his majority opinion, wrote that New York’s proper-cause requirement, as it has been interpreted by state courts, was inconsistent with the “Nation’s history of firearm regulation.”
“A State may not prevent law-abiding citizens from publicly carrying handguns because they have not demonstrated a special need for self-defense,” Thomas wrote.
But Breyer, in his dissent, wrote, “Only by ignoring an abundance of historical evidence supporting regulations restricting the public carriage of firearms can the Court conclude that New York’s law is not ‘consistent with the Nation’s historical tradition of firearm regulation.”
Breyer also wrote, “Many States have tried to address some of the dangers of gun violence just described by passing laws that limit, in various ways, who may purchase, carry, or use firearms of different kinds.”
“The Court today severely burdens States’ efforts to do so.”
– Additional reporting by CNBC’s Amanda Macias
Original Article: cnbc.com
United Airlines Will Cut 12% of Newark Flights in Effort to Tame Delays
United Airlines will cut about 50 daily flights from Newark Liberty International Airport next month in an effort to reduce delays that have disrupted travelers’ plans this year.
The cuts amount to about 12% of United’s schedule in its New Jersey hub and apply solely to domestic flights, starting July 1.
United executives have said the delays are the result of capacity constraints, airport construction and air traffic control — not airline staffing shortfalls.
Jon Roitman, United’s executive vice president and COO told staff in a note Thursday that “after the last few weeks of irregular operations in Newark, caused by many factors including airport construction, we reached out to the FAA and received a waiver allowing us to temporarily adjust our schedule there for the remainder of the summer.”
“Even though we have the planes, pilots, crews, and staff to support our Newark schedule, this waiver will allow us to remove about 50 daily departures which should help minimize excessive delays and improve on-time performance – not only for our customers, but for everyone flying through Newark,” he wrote.
Original Article: cnbc.com
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