GOODLETTSVILLE, Tennessee: Dollar General is bracing for a challenging year ahead, forecasting weaker-than-expected sales and profits as inflation and economic uncertainty weigh on low-income shoppers.

The discount retailer, which serves many budget-conscious Americans, said customers are struggling to afford even basic necessities, leading to cautious spending.

Concerns about a slowing economy, fueled by U.S. President Donald Trump's trade policies and federal budget cuts, have added to retailers' challenges. Dollar General now joins a growing list of companies warning of softer consumer demand in 2025.

According to LSEG data, the company expects full-year earnings to range between US$5.10 and $5.80 per share, falling short of analyst expectations of $5.85. It also projected same-store sales growth of 1.2 percent to 2.2 percent, below market estimates.

Despite the gloomy outlook, Dollar General's stock climbed 4 percent on Thursday after reporting stronger-than-expected holiday-quarter results, thanks to efforts to remodel stores and manage inventory more effectively.

The retailer has struggled over the past two years, with its stock losing nearly 70 percent of its value due to stiff competition from Walmart, Shein, and Temu. However, CEO Jeffery Owen Vasos's return in 2023 and his turnaround strategy have helped stabilize the company.

As part of those efforts, Dollar General reviewed its store portfolio and shut down 96 locations, mainly in urban areas that had become difficult to operate profitably.

"We believe these closures could just be the beginning of a larger culling process," said Truist Securities analyst Scot Ciccarelli.

For the fourth quarter, the company reported a 1.2 percent increase in comparable sales, surpassing expectations. It also posted earnings of $1.68 per share, beating analysts' forecast of $1.50.

While the company's short-term outlook remains uncertain, investors remain hopeful that store optimization and cost-cutting initiatives will help Dollar General regain momentum in the competitive discount retail market.