Dollar General is sounding the alarm on the economy and says its profits could suffer as its low-income customers start hurting

Dollar GeneralShutterstock/Jonathan Weiss

  • Dollar General's CEO is preparing for a weaker economy in 2019.
  • CEO Todd Vasos said on Thursday that the store's core customer is "feeling a little less competent" than 2018. "We're positioning ourselves for the back half of the year for a weaker consumer."
  • The chain is still growing at a rapid rate. Having opened hundreds of stores in 2107 and 2018, it will be opening 975 more in 2019.

When the economy bites, dollar stores are well positioned to thrive, but even Dollar General's CEO is preparing for the worst this year.

In a call with investors on Thursday after reporting earnings, CEO Todd Vasos explained that the store's core customer is "feeling a little less competent."

"We're positioning ourselves for the back half of the year for a weaker consumer," he said, and to cater to this consumer it will be offering more in-store promotions.

This follows increased promotions at the end of 2018, which factored into the company's profits during the fourth quarter taking a hit. While same-store sales were up 3.2% overall for the quarter, gross profit dropped more than expected thanks to a higher level of markdowns.

"We proactively invested in promotional activity to drive traffic and market share," CFO John Garratt said on the call, referring to Q4.

Garratt confirmed that these promotions will continue into 2019.

"Pricing is always competitive in discount retail and we watch the environment very closely. In 2019, our strategy is to further optimize our promotional activities as we focus on driving profitable sales and traffic growth," he said.

Read more: Dollar General is dominating in America. Here's how it keeps its prices so low

Analysts are expecting a potential recession to hit the US this year. Earlier this month, Business Insider reported that the likelihood of a major contraction in the economy had increased substantially since December, citing analysis from UBS.

Despite this, Dollar General is still one of the few brick-and-mortar retailers to be in rapid-growth mode. Thursday marked its 29th consecutive quarter of positive same-store sales growth. After opening hundreds of stores in 2017 and 2018, it is on track to open a further 975 stores in 2019.

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