Sales Creep Higher at Dollar General, Fred's

Same-store sales edged higher in July at Dollar General (DG) and Fred's (FRED), but slowing sales of home products kept a lid on results.

Dollar General said July same-store sales rose 3.6%, above the Thomson First Call estimate of 2.8%. Total sales increased 11.8% to $552.6 million from $494.3 million a year ago.

The company reported a 6% rise in same-store sales of its core "highly consumables" -- which offset an 8% drop in home products -- and said its average customer purchase was $8.31 vs. $8.27 a year earlier.

Dollar General was recently trading down 7 cents, or 0.4%, to $18.61.

At Fred's, comparable-store sales rose 2.5%, well below First Call expectations of 3.8%. Total sales rose to $101.7 million from $92.7 million in the prior year.

"The softness in sales we saw toward the end of June continued throughout July, reflecting a shortfall centered in home departments and soft lines," said Fred's CEO Michael J. Hayes, who said customers were heavily focused on promotional merchandise. Because of this and the company's efforts to bring inventories back in line, making room for fall merchandise, markdowns were higher than planned.

As a result, the company announced that it would reduce its second-quarter earnings by 2 to 3 cents a share from its original plan. Analysts were expecting the company to report earnings of 12 cents a share.

Recently, shares of Fred's were down 74 cents, or 4.4%, to $16.13.

Meanwhile, at Dollar Tree(DLTR), same-store sales fell 0.2%, below First Call estimates of 0.5% growth. The company said sales for its second quarter rose to $704.2 million from $626 million a year earlier.

"In the face of a challenging retail environment, we achieved sales within the low end of our forecasted range," said President and CEO Bob Sasser. "As the retail environment improves, I am optimistic about sales in the second half of the year."