Dollar General (NYSE:DG) announced disappointing second-quarter earnings on Thursday, attributing the results to financially constrained lower-income consumers.

What Happened: The discount retailer revealed that its core customers, primarily households earning less than $35,000 annually, are feeling more financially pressured than six months ago. CEO Todd Vasos noted that higher prices, softer employment levels, and increased borrowing costs have negatively impacted these consumers.

"The majority of them state that they feel worse off financially than they were six months ago as higher prices, softer employment levels and increased borrowing costs have negatively impacted low-income consumer incentive," he said.

Dollar General reported a 0.5% increase in same-store sales for the quarter ending Aug. 2, falling short of both its own and Wall Street's expectations. The growth was driven solely by consumables like food, rather than discretionary items.

Shares of Dollar General plummeted over 30% following the earnings release. Net sales rose by 4.2% year-over-year to $10.2 billion, while operating profit fell 20.6% to $550 million, partly due to markdowns and inventory losses.

In contrast, competitors Walmart (NYSE:WMT) and Target (NYSE:TGT) reported strong sales growth in their latest quarters. Dollar Tree (NASDAQ:DLTR), another rival, is set to report earnings next week.

Why It Matters: The earnings miss by Dollar General underscores a broader trend of cautious consumer spending amid persistent inflation. Even household names like J M Smucker Co. (NYSE:SJM) have warned of reduced consumer spending, affecting sales across various sectors.

Additionally, economic data has shown a mixed outlook. UBS Global Wealth Management recently increased the probability of a U.S. recession to 25%, citing softening job growth and unsettling unemployment data. Despite this, the firm still anticipates a soft landing for the economy, driven by consumer spending, albeit with a "cloudy" economic outlook.

Moreover, traders have scaled back their bets on a significant rate cut by the Federal Reserve, following an upward revision of U.S. GDP growth in the second quarter. This adjustment comes as the market eagerly awaits the release of the Personal Consumption Expenditure (PCE) price index, the Fed's preferred inflation gauge.

Initial jobless claims totaled 231,000 for the week ending Aug. 24, down from the upwardly revised 233,000 the previous week and slightly below the expected 232,000.

Price Action: Dollar General's stock closed at $84.03 on Thursday, down 32.15% for the day. In after-hours trading, the stock slightly recovered by 0.083%. Year to date, the stock has declined by 40.16%, according to data from Benzinga Pro.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote