(Reuters) – America’s top dollar store chains beat profit estimates on Thursday and said they would benefit from demand for affordable groceries and household essentials in coming months as rising unemployment threatens to spur a deep recession.
Designated as essential retailers, Dollar General Corp <DG.N> and Dollar Tree Inc <DLTR.O> were allowed to stay open while much of the United States remained shut due to lockdowns amid the coronavirus crisis, and saw a surge in sales of toilet paper, cleaning supplies and packaged foods.
While panic buying has now died down, both discount retailers said they expect skyrocketing unemployment and an economic downturn to lead to more shoppers looking for cheaper alternatives for groceries and clothing.
“In 2008, folks lost jobs … and they found us. And I think that’s some of what we’re planning for as we take a look into our crystal ball at back half of the year and 2021,” Dollar Tree Chief Executive Gary Philbin said, referring to the 2008-2009 financial crisis.
Dollar Tree’s shares jumped over 13%, as it also said first-quarter sales rose 8.2% to $6.29 billion, beating analysts’ estimates of $6.14 billion.
Larger rival Dollar General said sales rose 27.6% to $8.45 billion in the first quarter – its biggest jump in at least 14 years, according to Refinitiv data.
The company also said it expects to exceed its annual sales and profit forecasts and could resume its share buybacks as early as the current quarter.
Excluding certain items, Dollar General earned $2.56 per share, beating estimates of $1.74, while Dollar Tree reported a profit of $1.04 per share, compared to expectations of 85 cents.
(Reporting by Uday Sampath in Bengaluru; Editing by Maju Samuel and Sweta Singh)