Dollar General (DG) was sure walloped by a range of factors during a surprisingly bad third quarter. 

The dollar store reported Thursday that earnings came in at 84 cents a share, falling well short of Wall Street forecasts for 93 cents a share. Net sales rose 5% from the prior year to $5.32 billion, missing analysts estimates for $5.37 billion. The sour news didn't stop there, however.

Dollar General's same-store sales, a key retail measure that reflects sales at stores open more than a year, dropped 0.1%. Wall Street was looking for an 0.8% increase. Rival Dollar Tree (DLTR) said last week that third-quarter same-store sales rose 1.7%, ahead of estimates for a 1% gain. Meanwhile, Dollar General reduced its profit outlook for the year, saying earnings will come in below its long-term goal of 10% to 15% growth. 

For Dollar General the stunning sales and profit misses could be boiled down to several things.

First, the company began to lower prices on 10% of its top 250 selling items in the second quarter in an effort to compete with new price cuts -- mostly in food -- by behemoth Walmart (WMT) . As a result of the response to its arch nemesis, Dollar General's already razor thin profit margins took a hit in the third quarter -- gross profit margins fell 49 basis points from a year ago to 29.8%. 

"There is evidence Walmart has lowered food prices in certain categories, which likely pressured Dollar General -- we note that Dollar Tree is impacted less by this as it has a more discretionary product mix," points out Barclay's analyst Karen Short. "We believe Dollar General's initial price reductions were likely introduced more broadly in the third quarter, potentially pressuring results in the near-term," Short added.

If you liked this article you might like

Target Just Declared War on Amazon's Whole Foods Business and Walmart

Hurricane Harvey and a Disappointing Jobs Report -- Week in Review

Dollar for Your Thoughts

Closing Bell: Apple's September Launch Event; S&P 500 Ends Fifth Day of Gains

Broad Gains Push Wall Street Higher, S&P 500 on Track for Fifth Day of Gains