Products You May Like
Shares of Dollar Tree fell about 10% in premarket trading Wednesday after the discounter cut its full-year outlook, citing increasing pressures on middle-income and higher-income customers.
The retailer said it now expects its full-year consolidated net sales outlook to range between $30.6 billion and $30.9 billion. It expects adjusted earnings per share to range from $5.20 to $5.60. That compares to previous guidance of $31 billion to $32 billion in net sales and $6.50 to $7 for adjusted earnings per share.
In a news release, Chief Financial Officer Jeff Davis said the company cut the forecast to reflect a more conservative outlook and costs associated with converting 99 Cents Only stores that it recently acquired.
Davis laid most of the blame for lower earnings per share in the quarter on general liability claims. The company said it has had higher costs to reimburse, settle and litigate claims related to customer accidents and other incidents at stores.
He said Dollar Tree has also seen softer sales as customers across incomes were more careful about purchases.
Dollar Tree’s report comes about a week after major rival Dollar General slashed its full-year sales and profit outlook, sending its shares tumbling. Dollar General CEO Todd Vasos chalked up weak sales to “a core customer who feels financially constrained.”
Dollar stores, in particular, have felt pinched as their core customer — shoppers with lower incomes and little leftover money to spend on discretionary items — make tradeoffs after a prolonged period of pricier food and everyday costs. Walmart has won more business from value-conscious shoppers across incomes and newer online players, such as Temu, have also attracted customers with cheap merchandise.
Dollar Tree includes two store chains, its namesake, which sells a wide variety of lower-priced items like party supplies, and Family Dollar, which carries more food.
Same-store sales for the company rose by 0.7% in the quarter. At Dollar Tree, same-store sales increased by 1.3% and at Family Dollar, same-store sales fell by 0.1%. The industry metric takes out the impact of store openings and closures.
Along with contending with inflation-stretched shoppers, Dollar Tree has faced company-specific challenges. The retailer announced in March that it would close about 1,000 Family Dollar stores, citing market conditions and store performance. Then, in June, the company said it is considering selling the Family Dollar brand.
Dollar Tree bought Family Dollar for nearly $9 billion in 2015 and since then, it’s struggled to strengthen the grocery-focused chain and better compete with Dollar General.
As of Tuesday’s close, Dollar Tree’s shares are down nearly 43% so far this year. The company’s stock hit a 52-week low on Tuesday and closed the day at $81.65.