In a surprising turn of events, Dollar General's stock plummeted by 28% on Thursday, marking its biggest decline in history. The discount retailer cited a financially pressured customer base as the reason for slashing its outlook. The company now expects its fiscal 2024 same-store sales growth to be in the range of approximately 1% - 1.6%, significantly lower than its previous projection of 2.0% - 2.7%.

During the company's earnings call on Thursday morning, Dollar General CEO Todd Vasos expressed concerns about the challenging financial situation faced by lower-end consumers. He stated, "It appears to us very strongly that...this lower-end consumer continues to be very much financially strapped, especially as it relates to her ability to feed her families and support her families."

Vasos highlighted that the last week of each calendar month in the quarter was the weakest period, with customers primarily gravitating towards the 2,000 items priced at $1 or below. This shift towards more consumable goods and less seasonal, home, and apparel items further indicated the financial strain experienced by Dollar General's core audience. Vasos noted that the current situation seemed even more critical than what was observed in the previous quarter.

The negative impact extended beyond Dollar General, with rival Dollar Tree also seeing a decline of over 9% in sympathy. Dollar General had been implementing a "Back to Basics" improvement plan under Vasos, who returned to the company last year. However, the dollar store model has lost some appeal on Wall Street as major retail players like Walmart expand their market share across various income ranges.

CFRA Research senior equity analyst Arun Sundaram reduced the rating on Dollar General to Hold from Buy, highlighting the diminishing value and convenience of dollar store operators compared to retail giants like Walmart. Sundaram suggested that Dollar General might need to allocate more resources towards store remodels, price reductions, inventory markdowns, and wage increases, potentially impacting profit margins.

Dollar General's financial performance for the quarter reflected the challenges it faces. The company reported a decrease in gross profit as a percentage of net sales, dropping from 31.1% during the same period last year to 30% this year. Factors contributing to this decline included increased markdowns, higher inventory damages, a higher proportion of sales in the consumables category, and increased shrink.

The company's adjusted earnings per share for the quarter stood at $1.70, falling short of market expectations of $1.79. Revenue came in at $10.21 billion, slightly below the consensus estimate of $10.36 billion.

With its stock down over 30% this year, Dollar General now faces the task of regaining investor confidence amidst a challenging retail landscape.