Dollar stores get whacked by higher freight costs

There are disappointing signals coming from the very low-end of the retail sector.

Dollar General on Thursday forecast a full-year profit outlook that was below analyst estimates.

The ultra-discounter is citing higher transportation and raw material costs as putting a drag on margins.

Dollar General and its peer Dollar Tree are particularly vulnerable to global supply disruptions and port delays, which can eat into the razor-thin margins required to keep prices as low as possible at the cash register.

Dollar General also warned that comparable sales will fall 2-1/2 to 3-1/2 percent for the year.

The sales and profit warnings overshadowed quarterly results.

Sales came in slightly better than expected, while profits topped forecasts.

Dollar Tree also issued a warning on Thursday - cutting its full-year profit forecast as well. It said ocean freight costs from China, a major source of lower-cost production, hit an all-time high...and are up more than 20 percent since May.

Shares of both discount retailers fell in early Thursday trading.