Dollar General (DG.US), the largest discount retailer in the United States, reported second-quarter results before the market opened on Thursday that were overall below expectations and lowered its full-year performance guidance. Executives said that its core customers "feel financial pressure."

Dollar Genera second quarter results

The company's main financial data showed that net sales were US$10.21 billion, a year-on-year increase of 4.2%, slightly lower than the expected US$10.37 billion; same-store sales growth was 0.5%, an improvement from -0.1% in the same period last year, but lower 2.07% higher than expected; gross profit margin was 30%, lower than last year's 31.1% and expected 30.3%; selling and administrative expenses accounted for 24.6% of revenue, slightly higher than last year's 24% and expected 24.4%; operating profit It was US$550 million, a year-on-year decrease of 21%, lower than the expected US$587.5 million; earnings per share was US$1.70, a year-on-year decrease to US$2.13 in the same period last year, falling short of the expected US$1.79.

In terms of full-year performance guidance, earnings per share were lowered from US$6.80 to US$7.55 to US$5.50 to US$6.20, lower than analysts' expectations of US$7.11; same-store sales growth forecast was lowered from 2% to 2.7% to 1% to 1.6%, lower than expected of 2.47%; net sales growth is expected to be adjusted from 6% to 6.7% to 4.7% to 5.3%; the effective tax rate is expected to be 23%, slightly higher than the previous 22.5% to 23.5%; capital expenditures are expected to remain at 1.3 billion to 1.4 billion billion, lower than analysts’ expectations of $1.39 billion.

Chief Executive Officer Todd Vasos acknowledged the disappointing results, saying, "We are not pleased with our financial results, including revenue that was lower than our quarterly guidance." He blamed some of the blame on "core customers who are feeling the pinch." Sales trends are weak. Judging from the location of the company's stores, it seems that consumers throughout the Northeastern United States have been more seriously harmed by the "Bidenomics" policies.

(Source: Wall Street News)

The poor results caused Dollar General to plunge 23.5% in pre-market trading on Thursday, falling to the midpoint of the $94 range, its lowest level since early 2018. The stock continued to fall after the opening, with a drop of 29.67% during midday, the largest single-day decline in the stock's history. The stock price was equivalent to the level at the end of 2017.

(Source: uSMART)

Retail sales data is poor, interest rate cuts continue to heat up

Data shows that Dollar General has nearly 19,000 stores in the United States, distributed in 48 states and 8,000 cities. Therefore, some analysts believe that Dollar General’s performance is a barometer for observing the financial status of middle- and low-income consumers.

Financial media Zerohedge wrote an article saying that Dollar General’s poor performance at least shows that the downward trend in consumption is still continuing and may worsen in the next few months. Therefore, the Fed's interest rate cutting cycle may begin as early as September 18.

Michael Reid, an American analyst at Royal Bank of Canada, said that the employment report released earlier this month was average and the market will pay more attention to retail sales data to look for signs of weakness. Jefferies' analyst team believes that the labor market is initially showing signs of weakness, but it has little impact on consumption. Although consumers are spending cautiously, they have not cut back on spending. These signs indicate that the economy is slowing down rather than recession, and there is still room for improvement. . Bank of America Securities analyst Aditya Bhave agrees. But Assaly, chief market strategist at Toggle AI, said that if retail sales are much lower than expected, or exacerbate concerns about recession, the Fed may be more aggressive, which may lead to more panic in the market.

At present, the market has determined that the Federal Reserve will start to cut interest rates in September. The question is whether to cut interest rates by 25 basis points or 50 basis points. According to the CME Fed Watch Tool, investors are generally betting on a 25 basis point interest rate cut in September, and the probability of a 50 basis point interest rate cut is about 26.5%.

After Dollar General's results are released, the dismal retail sales data may boost the Federal Reserve's determination to cut interest rates by 50 basis points.

How to make low-risk investments in the context of interest rate cuts?

As the wave of interest rate cuts gradually comes into play, the interest rates of time deposits are bound to drop step by step, making them less attractive. For investors looking for low-risk investment tools that can also provide stable returns during interest rate cuts, U.S. bonds are an ideal choice that can effectively diversify investment risks.

Investing in U.S. bond ETFs is the most convenient way to invest in U.S. bonds. Investing in U.S. bond ETFs simplifies the purchase and management process of U.S. bonds. Through U.S. Treasury ETFs, investors do not need to purchase and hold a variety of U.S. Treasury bonds of different maturities individually. They can easily own a basket of U.S. Treasury bonds by purchasing one ETF, covering U.S. Treasury bonds of different maturities and categories. This article focuses on introducing U.S. bond ETFs so that investors can prepare themselves for a new round of global interest rate cut cycles.

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This picture is for illustrative purposes only