Thursday saw a significant tumble in Dollar General’s stock value, as the budget-friendly retailer grappled with cutbacks in spending by its cost-conscious clientele, leading the company to trim its financial forecasts.

Stock prices took a severe dip, sinking as far as 21% to an intraday low of $159.13 — a record not seen since the dawn of the COVID-19 pandemic in March 2020. While the loss was later trimmed to 19%, with the closing price at $161.83, the ripple effects were felt throughout the day.

The driving force behind the drop was a noticeable shift in customer spending habits, with a heightened focus on essential items such as food over discretionary spending. This shift caused Dollar General’s sales and earnings for the fiscal first quarter to fall short of Wall Street’s estimates, triggering a reevaluation of the company’s full-year projections.

The retailer attributed this shift in spending to several factors, including smaller-than-expected tax refunds and decreased food stamp benefits, which were curtailing the spending capabilities of their customers. The company highlighted these issues during a recent conference call.

“Our customers are increasingly depending on food banks, savings, and credit cards,” remarked CEO Jeffrey Owen on the call, pointing out the current peak in credit card rates.

As financial strain mounts, Dollar General’s customer base is gravitating towards even more economical items, including those priced at or below the $1 mark.

This evolving landscape has led Dollar General to revise its expectations for fiscal 2023. Instead of the formerly projected per-share earnings growth of 4%-6%, the company is now bracing for flat earnings or even a decline of up to 8% compared to the previous year. Similarly, same-store sales growth predictions were also adjusted from the earlier 3%-3.5% to a more modest 1%-2%.

With first-quarter earnings settling at $2.34 per share on a revenue of $9.34 billion, the figures fell short of the FactSet estimate of $2.38 per share and $9.47 billion in sales.

These trends highlight the importance of understanding the consumer landscape for investors and entrepreneurs alike, underlining how shifts in consumer behavior can have a ripple effect through the business and investment world.