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If Dollar General (DG) is having a hard time, imagine how its customers must feel. Shares of the $20 billion low-cost U.S. retailer fell 25% on Thursday after it cut its sales forecasts and reported second quarter earnings that didn’t meet expectations. Chief Executive Todd Vasos painted a troubling picture of the low-income group that make up the lion’s share of the company’s shoppers, and a sizeable chunk of the U.S. population.

It’s not that the company is having too hard a time attracting customers. Sales rose to $10 billion in the second quarter, 4% more than the same quarter last year. More people came into the stores, Vasos said, though spent slightly less on each transaction. While sales growth was worse than the company hoped, it was still more than Walmart and Target’s top lines are expected to grow this quarter, according to estimates from LSEG. With a gross profit margin of 30%, higher than both of the two big box sellers, Dollar General is managing the rising cost of goods better than others, too.

The trouble is that the company is seeing some scary signs in its shoppers, who are among America’s least well off: 60% of them earn less than $35,000 a year, according to Vasos, about half the national average. Sales in more discretionary goods such as clothing were weak. The last week of both June and July were the softest of each month by far, suggesting that people were less able to stretch their budgets. And in the company’s most recent survey, a third of its customers said they were delinquent on a credit card.

Against this backdrop, Dollar General has a different challenge than other companies with a richer clientele. When costs rise, a dollar store can either sell fewer toilet rolls per pack, or watch its margin fall, more or less. Like the average shopper who is stretched, Dollar General has come up to the edge of where it can cut corners: a 1.5 percentage point increase in expenses as a percentage of sales wiped almost 20% off its operating profit. Frugality is a tricky balancing act, and not just for cash-strapped customers.

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Dollar General’s shares fell more than 25% on Thursday after the company cut its annual sales forecast. The low-cost US retailer now expects fiscal 2024 same-store sales to rise 1% to 1.6%, down from the prior forecast of 2% to 2.7%. Sales net of discounts and certain taxes rose to $10.2 billion for the quarter ended Aug. 2, an increase of 4.2% compared to the same quarter last year. Analysts’ average estimate was $10.4 billion, according to LSEG data.

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