Dollar General exceeded expectations for first-quarter same-store sales and profit on Thursday, driven by a surge in demand for affordable groceries and essentials as persistent inflation continued to strain household budgets.

The company has focused on offering relevant merchandise, increasing staff in stores, and expanding its private-label brands to attract consumers amid intense competition from rivals like Walmart (NYSE
), Target, and Chinese e-commerce platform Temu.

“These results were driven by strong customer traffic growth and market share gains during the quarter,” said CEO Todd Vasos.

According to data analytics firm Placer.ai, visits to Dollar General (NYSE
) increased by 12.6% year-over-year in the first quarter.

Earlier in May, Walmart’s quarterly results indicated that U.S. shoppers remain resilient, although Target warned about customers delaying purchases.

“These results were pretty consistent with what we’ve been seeing throughout the retail industry,” said Arun Sundaram of CFRA Research.

For the quarter, Dollar General’s same-store sales rose by 2.4%, surpassing LSEG estimates of a 1.61% increase.

Despite these strong results, the company’s shares pared some premarket gains, up 2.7%, due to what analysts described as “softer-than-expected” second-quarter projections.

For the second quarter, Dollar General expects same-store sales to increase in the low 2% range, below analysts’ expectations of 2.25% growth. The company forecasts profit to be between $1.70 and $1.85 per share, compared to estimates of $1.92.

“Dollar General is still pretty early in its turnaround strategy … it’s going to take at least a few more quarters before we see strong top and bottom line growth,” Sundaram added.

In the first quarter, Dollar General reported a per-share profit of $1.65, exceeding expectations of $1.57. However, gross profit as a percentage of net sales fell to 30.2% from 31.6% a year earlier, impacted by higher markdowns and an increase in retail shrink, including inventory loss due to theft or breakage.

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