A sign is posted in front of the Dollar Tree and Family Dollar store on March 13, 2024, in Rio Vista, California.
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shares dollar tree The discounter cut its full-year forecast, citing growing pressure on middle- and upper-income customers, and its shares fell about 10% in premarket trading Wednesday.
The retailer said it now expects its full-year consolidated net sales outlook to be between $30.6 billion and $30.9 billion. Adjusted earnings per share are expected to be $5.20 to $5.60. That compares with previous guidance for net sales of $31 billion to $32 billion and adjusted earnings per share of $6.50 to $7.
in a Press release, Chief Financial Officer Jeff Davis said the company lowered its forecast to reflect weaker sales and costs associated with renovating 99 Cents Only stores. The company also said it has higher costs to reimburse, settle and litigate claims related to customer accidents and other incidents at its stores.
Here’s how Dollar Tree performed in its fiscal second quarter ended August 3:
- Earnings per share: 62 cents, though it’s unclear whether it matched analysts’ expectations polled by LSEG.
- income: $7.38 billion, unclear if comparable
Dollar Tree’s report comes about a week after major rivals Dollar General The company slashed its full-year sales and profit forecasts, causing its stock price to plummet. Dollar General Chief Executive Todd Vasos attributed the weak sales to “core customers feeling financially strapped.”
Dollar stores, in particular, are feeling squeezed as their core customers — shoppers with lower incomes and little left to spend on discretionary items — have made the trade-offs of expensive food and daily expenses over a long period of time. pressure. Walmart is winning more business from value-conscious shoppers across income levels, and emerging online retailers like Temu are luring customers with bargains.
Dollar Tree owns two chains, with its namesake stores selling a variety of low-priced items such as party supplies, and Family Dollar, which sells more food.
The company’s same-store sales grew 0.7% in the quarter. Dollar Tree’s same-store sales grew 1.3%, while Family Dollar’s same-store sales fell 0.1%. The industry measure strips out the impact of store openings and closings.
Davis said on the earnings call that the company’s sales were soft, especially in non-essential businesses. He said this “reflects the growing impact of macro pressures on the purchasing behavior of higher-income customers at Dollar Tree.”
“Our initial second-quarter outlook did not anticipate these pressures being transferred to Dollar Tree’s customer base,” he said.
In addition to dealing with shoppers under inflationary pressure, Dollar Tree faces company-specific challenges. The retailer announced in March that About 1,000 Family Dollar stores to closeciting market conditions and store performance. Then, in June, the company said it was considering selling the Family Dollar brand.
Dollar Tree acquired Family Dollar in 2015 for nearly $9 billion and has been working ever since to strengthen the grocery-focused chain and better compete with Dollar General.
Liability claims also add to the company’s challenges. On the company’s earnings call, Davis said claim outcomes, especially older claims, “are becoming increasingly less predictable as a result of a more volatile insurance environment that results in higher settlement and litigation costs.”
“These claims continue to develop adversely due to the rising costs of repaying, settling and litigating these claims, which impacts our actuarially determined liabilities,” he said.
Dollar Tree shares were down nearly 43% year to date as of Tuesday’s close. The company’s shares hit a new 52-week low on Tuesday, closing at $81.65.
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