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Dollar General is gaining customers from higher income brackets amid inflation

Dollar General (DG) is seeing shoppers above its "core" income bracket more frequently.

CEO Jeff Owen said the retail chain is seeing strong demand from consumers and gaining market share as Americans look to pinch pennies amid inflation. During an earnings call with analysts, he said, "Customers and income brackets above our core customers [are] shopping with us at an increasing rate."

Dollar General prides itself on low everyday prices and a $1 or less price point (a likely dig at competitor Dollar Tree (DLTR), which increased its prices to $1.25 for most items). As economic uncertainty persists, Owen believes the company will be "increasingly important" to consumers in the next year.

"We're an all-weather brand, and we've shown over the last three decades how we can serve that customer in any economic environment."

So, who is the Dollar General customer? Based on digital capabilities, Owen explained who "she" is.

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"She's still employed ... That is the single most important factor to her economic health ... [But] we're seeing that she's worse off financially and it's primarily due to food inflation."

Food inflation took a toll on consumers in 2022. Last month, grocery inflation decelerated for the sixth consecutive month, following the highs of August 2022, but it is still up 0.3% from January 2023 and up 10.2% compared to last year, causing consumers to change the way they shop.

"She's relying more on on savings, credit cards, and also borrowing money, quite frankly, from friends... What we're seeing in the shopping behavior is that then translates into our customer coming more often, she's buying fewer items on occasion...Also, we're seeing her lean into private brands and we're seeing her shift her purchases more to consumables."

Dollar General has been investing in its DG Fresh Facilities to boost self-distribution of frozen and refrigerated products such as dairy, deli, and frozen. As of Q4, it now has 12 facilities that deliver perishable items to more than 19,000 locations. At the end of 2022, Dollar General offered fresh produce in more than 3,200 stores and plans to expand the offering to more than 5,000 stores by the end of 2023.

VALLEJO, CALIFORNIA - MARCH 17: A customer shops at a Dollar General store on March 17, 2022 in Vallejo, California. Dollar General announced fourth quarter earnings of $2.57 per share, just beating analyst expectations of $2.56 per share. The retailer had net income of $597.4 million, down from $642.7 million one year ago. (Photo by Justin Sullivan/Getty Images)

Despite this influx of shoppers, the retail chain missed estimates overall and saw same-store sales increase 5.7%, slightly lower than estimates of 6.23% in its Q4 2022 results. Revenue missed as well, coming in at $10.20 billion, lower than estimates of $10.24 billion. Earnings per share came in lower as well, $2.96 per share compared to estimates of $2.99 per share. Year-to-date shares of Dollar General are down nearly 13%.

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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