👀 Ones to watch: Undervalued stocks to buy before they report Q3 earningsSee Undervalued Stocks

Dollar Tree cuts annual forecasts after dour quarter on weaker demand; shares drop

Published 09/04/2024, 06:38 AM
Updated 09/04/2024, 01:21 PM
© Reuters. FILE PHOTO: The Dollar Tree sign is seen outside the store in Washington, U.S., June 1, 2021. REUTERS/Erin Scott/File Photo
DLTR
-

By Anuja Bharat Mistry

(Reuters) -Dollar Tree joined main rival Dollar General (NYSE:DG) in cutting annual forecasts after missing quarterly estimates on Wednesday as the discount store operator struggles to attract price-sensitive shoppers amid rising competition.

Shares of the company, which have lost nearly half of its value so far this year, were last down about 20% after touching an over four-year low of $64.04.

Bigger rivals including Walmartand Target as well as newer entrant, PDD Holding's ecommerce platform Temu, have been able to lure in shoppers with lower prices for everything ranging from groceries to apparel as consumers looks for value

"While rising prices drove shoppers to low-cost retailers like Dollar Tree (NASDAQ:DLTR) and Dollar General, that wave has crested and those merchants are now struggling to compete," eMarketer analyst Zak Stambor said.

Dollar Tree CFO Jeff Davis said that the annual forecast cut was partly due to expectations of conservative sales for the balance of the year.

"Customers are expanding their consumption (on low-margin essentials) while contracting their spending on discretionary items because of macro belt-tightening," said Davis on a post-earnings call.

Last week, rival Dollar General's shares also slumped nearly 30% as low-income households feel more pressure about spending on discretionary items.

Dollar Tree has been in the process of restructuring its business and in June said it was exploring options, including a potential sale or spinoff of its Family Dollar banner.

Earlier this year, it had outlined plans to shutter 970 Family Dollar stores. As of Aug. 3, Dollar Tree has shuttered about 655 stores and would close 45 stores through the remainder of the year, the company said on Wednesday.

Chesapeake, Virginia-based Dollar Tree expects annual sales between $30.6 billion and $30.9 billion, compared with its prior forecast range of $31 billion to $32 billion.

The company sees annual adjusted earnings per share in the range of $5.20 to $5.60, compared with its prior forecast range of $6.50 to $7 per share.

© Reuters. FILE PHOTO: The Dollar Tree sign is seen outside the store in Washington, U.S., June 1, 2021. REUTERS/Erin Scott/File Photo

Dollar Tree posted second-quarter net sales of $7.37 billion, compared with analysts' estimates of $7.49 billion, according to LSEG data.

It reported quarterly adjusted profit of 67 cents per share, below analysts' estimates of $1.04 per share.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.