The company saw its stock price tank by more than 30 percent after a less-than-savory earnings call on Thursday. The value store blamed its slow growth and guidance cut on an unstable consumer and issues with shrink, reporting lower-than-anticipated sales and a decline in average transaction amount.
Those issues seemed to be at the heart of Dollar General’s decision to slash guidance, taking heat from investors. But employees have highlighted other issues, like inefficiencies in their work, unsafe stores and low wages, noting that a negative experience on their behalf often also translates to poor consumer experience.
In past documents, like its most recent safety audit, Dollar General has cited low staffing as a concern. Employees, too, have publicly said their experiences have been less than stellar because of issues with retainment, shift scheduling and working alone.
During the earnings call, Todd Vasos, the company’s CEO, said that as the company looks at the way forward and reevaluates against its back-to-basics plan, meant to cut costs and increase efficiencies, it has made some improvements on labor.
Vasos said upgrades to operations have helped mitigate staffing issues.
“Our supply chain and merchandising teams have also contributed to the in-store progress by helping to simplify operations for our teams, which should enhance both the associate and customer experience in our stores,” he said. “All of these improvements have continued to drive lower year-over-year turnover at all levels within our retail operations, including regional director, district manager, store manager, assistant store manager and sales associates.”
Vasos also cited an increase in employee presence at the front of stores, which he said will help provide “friendly, welcome and elevated levels of engagement [with] our customers while also facilitating the positive checkout experience.”
It seems part of the return to reliance on employees at checkout may be coming from shrink. During the call, Kelly Dilts, Dollar General’s chief financial officer, said that the gross profit as a percentage of sales came in at 30 percent, down by 1.12 percent. She partially attributed that directly to shrink.
“This decrease was primarily attributable to increased markdowns, increased inventory damages, a greater proportion of sales coming from the consumables category and increased shrink,” Dilts said on the call, later noting that, “While shrink continues to be a significant headwind, we are pleased with the progress we’re making and believe our actions, including our self-checkout conversions, are having a positive impact.”
Vasos said the company has also shifted how it uses labor hours to prioritize ensuring what consumers want to purchase is in stock as frequently as possible.
“We have also focused labor hours on perpetual inventory management in our stores in an effort to significantly improve our in-stock levels and support our sales growth,” he said on the earnings call.
But though Vasos and Dilts seem to indicate employee experience is on the up and up, one labor group begged to differ. Step Up Louisiana, which has led campaigns to push dollar stores to improve workers’ rights and pay, said Dollar General has not gone nearly far enough to help its employees, who have said they feel unsafe in stores.
Ben Zucker, co-director of the non-profit, said making stores more efficient but doing next to nothing for employees’ quality of life isn’t the way to run a business.
“‘Refocusing labor hours’ sounds like a fancy way of saying, ‘rearranging the deck chairs on the Titanic.’ Moving responsibilities around doesn’t change the fact that Dollar General was built on an unsustainable model of squeezing profits out of stores by understaffing them,” he told Sourcing Journal. “Until Dollar General makes a massive investment in better pay, adequate staffing and addressing the rats, blocked exits and countless other hazards in their stores, they are going to continue to lose workers, customers and money.”
The group has targeted the dollar store industry as a whole, it has taken on Dollar General as a specific target; earlier this year, members of Step Up Louisiana protested at Dollar General’s shareholder meeting. They have also held worker-led and customer-led actions throughout the greater New Orleans area and have called on the company to reform in myriad ways.
“Dollar General workers organizing with Step Up Louisiana have been demanding an end to Dollar General’s safety crisis for years now and are ready to sit down with company leadership at any point to discuss real solutions.”
And while the associate experience is paramount to the success of most retail locations, consumer appetite also remains critical. For Dollar General, that may be an uphill battle. Throughout the call, Vasos and Dilts stressed the strenuous consumer environment, noting that they have backed off once-essential purchases and have increased their reliance on credit.
Vasos said patterns in the company’s sales and profits “suggest our customers are less able to stretch their budgets through the end of the month. With that in mind, as well as our continued softness in discretionary sales in our own customer data and survey work, we believe the softer-than-anticipated sales performance in Q2 is at least partially attributable to a core customer that is less confident of their financial position.”
Earlier this week, Salesforce projected that low-priced online marketplaces like Shein and Temu would take market share away from value and dollar store players this holiday season. And as Vasos and Dilts announced lowered guidance, with the financial executive noting that the company “assumes no improvement in the back half of the year,” Vasos said it could prove difficult to pull consumers back in.
“The majority of [customers] state that they feel worse off financially than they were six months ago as higher prices, softer employment levels and increased borrowing costs have negatively impacted low-income consumer sentiment,” he said.
