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Dollar General stock slides on earnings miss, slashed profit outlook

Yahoo Finance Live anchors discuss the decline in stock for Dollar General following third-quarter earnings.

Video Transcript

[AUDIO LOGO]

BRAD SMITH: Guys, checking in on some of the other retailers that are moving this morning, I kind of hinted at it a moment ago because the number I couldn't find in my notes, but shares of Dollar General, they're lower by about 7% this morning after missing earnings estimates on the bottom line. The company also announced that they would be slashing profit guidance for the fiscal year by over 5%.

So the Street's certainly paying attention to that in addition to the mixed results that came through here, a miss on earnings but a beat on revenue there just barely by the hair of the chinny-chin-chin. So ultimately, it just is coming back to that guidance.

JULIE HYMAN: Yeah, it's coming back to the guidance, and it's coming back to margins, right? Because as we have talked about, right, companies like Dollar General are going to get more traffic at a time like this. People are trying to save money. However, if costs-- if input costs for Dollar General are still high and it's trying to keep costs low-- in other words, it has less pricing power, it sounds like, than some of its competitors and maybe less scale than, say, a Walmart in order to try to maintain at least some margins to some degree.

So the company says, as a result of these greater than anticipated gross margin pressures, which we believe are temporary but will continue to a lesser degree through the fourth quarter, the company-- that's why they were cutting their forecast here. So that's what was going on there.

Big Lots, by the way, also reported. And this is another discount retailer, right? Comp sales there were just out and out down, down by 11.7%, which is a steeper drop than estimated. Gross margin coming in at 34%, which is a decline of nearly 5 basis points year over year.

BRAD SMITH: Yeah, just briefly on Dollar General, since I gave a deep tease to some of the inventory numbers.

JULIE HYMAN: Oh, inventory? Yes, please.

BRAD SMITH: Yeah, there was an increase of about 28% on a per store basis there. And so that averaged across the total merchandise inventories there, but $7.1 billion compared to $5.3 billion in this same period last year. And so you've got increased inventories. You've also got a company that's still going to continue to open up more stores here too. So that's a significant cost. And that's going to compress, again, margins to your point a moment ago.

JULIE HYMAN: Yes, all about inventory and margins still.