Dollar General (DG) reported better-than-expected third-quarter earnings Tuesday, but its warning of cautious consumers and tough competition sent shares of the specialty discounter and its peers tumbling.
Earnings per share rose 26% in Q3 to 63 cents, topping forecasts by 3 cents. It was the sixth quarter in a row that Dollar General topped analysts' consensus.
The deep discounter, which operates some 10,000 stores, said sales climbed 10% to $3.97 billion, edging past forecasts.
But the 4% same-store sales growth was lighter than some analysts expected, while the gross profit margin unexpectedly dipped.
Most important, Dollar General's full-year earnings guidance implied Q4 EPS will be 89 cents. Wall Street had seen 94 cents.
CEO Rick Dreiling blamed tough year-earlier comparisons and "near-term pressures that are impacting our customers' confidence and spending.
He also cited a "challenging competitive environment," which is spurring the retailer to step up advertising.
Dollar General shares dived 7.8% to 42.94 to a nine-month low.
Its stock has lost 14.5% so far in December and more than 23% from its July peak.
Discounters in recent years have fared well as price-conscious consumers shop for bargains amid a tough economic environment. But specialty chains in particular have struggled in recent months, and sold off Tuesday on Dollar General.
Dollar Tree (DLTR), which has some 4,400 stores, sank 3.7%, nearing the 52-week low set last month. It reported a 19% gain in per-share profit in its latest quarter.
Highly rated Family Dollar (FDO) sank 8.4%, crashing below its 200-day moving average.
Meanwhile, No. 1 global retailer Wal-Mart Stores (WMT), which saw EPS advance 11% in its most recent quarter, fell 1.7%.
Warehouse club operator Costco Wholesale (COST), which set a $7 special dividend at the end of November and then went ex-dividend earlier this month, reports earnings Wednesday.
Analysts forecast a 16% hike in EPS to 93 cents. Costco already said fiscal Q1 sales rose 10% to $23.2 billion. Shares fell 64 cents to 98.31.