Discount Retailers Struggle With Shrink, Lower Demand for Non-Essential Products

Dollar Tree has trimmed its full-year sales forecast.

November 29, 2023

Reuters reports that Dollar Tree trimmed its full-year sales forecast after missing its third-quarter estimates. The retailer indicated that “persistent inflation was weighing on demand for non-essential products at its stores.”

“As higher food prices, borrowing costs and rising credit card debt hammers household budgets, customers are curtailing the purchase of higher-margin discretionary items such as party products and toys,” the article notes. In addition, Dollar Tree has been dealing with high shrink. Despite the challenges, the retailer opened 197 new stores during the quarter.

“Our current outlook takes into consideration several factors including continuing strength at the Dollar Tree banner, incremental freight savings, softer demand from low-income households and a continuation of the shrink and sales mix headwinds we have seen throughout the year,” Chief Financial Officer Jeff Davis said in a press release.

In August, The Wall Street Journal reported that Dollar General CEO Jeff Owen said, “Our core customers continue to tell us they feel financially constrained. Her savings are gone, and she is still living with inflationary pressures.”

According to the same article, Five Below, a value retailer catering to teens and tweens, cut its full-year profit outlook, citing challenges with shrink. “Executives, though, said demand is holding up as more shoppers hunt for deals. ‘Value is really in vogue again,’ Chief Executive Joel Anderson said.”

Earlier this month, NACS Daily reported that retailers fear excess stock this holiday season.