Dive Brief:

• Dollar General on Thursday reported that its first quarter net sales increased 9% year over year to $6.11 billion while same-store sales rose 2.1%, according to a press release. The deep discounter posted net income of $365 million, a more than 30% increase over the year-ago period. 
• Despite the solid year-over-year increases, the company's stock fell more than 7% from its Wednesday closing price as Dollar General's top-line sales, same-store sales and profits missed analyst expectations. The Factset consensus, cited by MarketWatch, estimated sales of $6.18 billion and a 3.2% increase in comps.
• Dollar General CEO Todd Vasos said on a conference call with analysts that increases in both the number of average units sold and dollars per basket pushed the company's store sales, according to a Seeking Alpha transcript. But he also said that unseasonable weather in March and April hurt the retailer's sales of non-consumables, particularly in spring and summer products. He added that sales in the second quarter were healthy so far, and the company reiterated its full-year guidance.

Dive Insight:

Dollar General wasn't the first retailer to blame disappointing Q1 results on abnormal weather patterns across the country, and it wasn't the first to be met with skepticism.

Jefferies analyst Daniel Binder questioned the notion that weather was what spooked the market after the retailer's results and instead pointed to weak results at Dollar General's main competitor in the deep discount space, Family Dollar.  

"[W]e think the bigger issues could be about what the market thinks is coming on price," Binder said in a Thursday note emailed to Retail Dive. "With Family Dollar getting less of an improvement in comps for the investment made thus far, we can't help but wonder if a more aggressive stance is coming on price, particularly when we consider the fairly consistent 4%-5% price gap we see between [Dollar General] and Family Dollar in the nine markets we measure each quarter."

For his part, Vasos said the company sees "rational pricing activity" across the industry, but added that the company remained "committed to our everyday low price strategy" and that "we routinely monitor our price position and make adjustments as necessary."

Price and weather alone are not the only potential threat to Dollar General's growth. Neil Saunders, managing director of GlobalData Retail, noted that a decline in customer traffic contributed to slower growth in the retailer's comps.

"From our data, it is clear that while Dollar General held on to its core customers over the first quarter, some non-core customers migrated away," Saunders said in comments emailed to Retail Dive. "We attribute this to improvements in household finances thanks to tax cuts and bonuses. The affected groups spent some of this money on dining out, treating themselves at other retailers, and buying more online. In our view, this reduced their need to use Dollar General over the period." But Saunders also said that the discounter's "underlying trade remains strong," thanks to its low prices and geographical convenience to rural communities in the U.S.  

The retailer is still planning for growth. In Q1, Dollar General opened 241 new stores and remodeled 322, in addition to spending tens of millions of dollars on distribution and technology investments. For the full year, the company plans to open 900 new stores and remodel another 1,000.

In the conference call, Vasos also pointed to a number of initiatives meant to boost the company's top and bottom lines, including an effort to reduce "unproductive inventory" and operating complexity at stores, adding self-checkout technology and the addition of healthier food options, among other efforts.