DLTR Stock – Dollar Tree Cuts Full-Year Forecast: Shares Plunge 22% Amid Financial Pressures

DLTR Stock – Dollar Tree’s shares experienced a sharp decline of more than 22% on Wednesday, following the retailer’s announcement of a reduced full-year financial outlook. The company cited increasing financial pressures on middle- and higher-income customers as a key factor in the adjustment.

Revised Full-Year Outlook

Dollar Tree now forecasts its full-year consolidated net sales to be between $30.6 billion and $30.9 billion, down from its previous guidance of $31 billion to $32 billion. The expected adjusted earnings per share (EPS) has also been lowered to a range of $5.20 to $5.60, compared to the earlier projection of $6.50 to $7.

Chief Financial Officer Jeff Davis explained that the revised forecast reflects softer sales and higher costs associated with the conversion of 99 Cents Only stores. Additionally, the company has faced increased expenses for reimbursing, settling, and litigating claims related to customer incidents.

Fiscal Second Quarter Performance

For the fiscal second quarter ending August 3, Dollar Tree’s performance fell short of Wall Street expectations:

• Earnings per Share: $0.97 (adjusted) vs. $1.04 expected
• Revenue: $7.38 billion vs. $7.49 billion expected

The $0.97 EPS excludes a $0.30 per share charge for general liability claims.

Industry Challenges and Comparisons

Dollar Tree’s disappointing results come shortly after Dollar General also reduced its full-year sales and profit outlook, leading to a drop in its shares. Dollar General CEO Todd Vasos attributed the weak sales to “a core customer who feels financially constrained.”

The broader dollar store sector has been under pressure as lower-income shoppers, who constitute the core customer base, face financial constraints due to rising food and everyday costs. Walmart has benefited from this shift, capturing more business from value-conscious shoppers, while newer online competitors like Temu have also attracted customers with inexpensive merchandise.

Same-Store Sales and Company-Specific Issues

Dollar Tree’s same-store sales rose by 0.7% in the quarter. However, there was a 1.3% increase in same-store sales at Dollar Tree stores, and a 0.1% decrease at Family Dollar stores.

The company has faced several challenges beyond inflation. In March, Dollar Tree announced plans to close approximately 1,000 Family Dollar stores due to market conditions and poor store performance. Additionally, there are considerations to sell the Family Dollar brand, which Dollar Tree acquired for nearly $9 billion in 2015.

Liability Claims and Financial Impact

Liability claims have also burdened Dollar Tree. Davis noted that the outcome of these claims, particularly older ones, has become increasingly difficult to predict due to rising settlement and litigation costs. The ongoing volatility in the insurance environment has exacerbated the company’s challenges.

Stock Performance

As of Tuesday’s close, Dollar Tree’s shares have fallen nearly 43% year-to-date. The stock hit a 52-week low on Tuesday, closing at $81.65.

FAQs on Dollar Tree’s Recent Financial Update