Dollar Tree Stock Sinks As "Macro Pressures" Impact Consumer Spending
Dollar Tree stock is plunging Wednesday after the discount retailer missed Q2 expectations and slashed its full-year outlook. Here's what you need to know.
Dollar Tree (DLTR) stock is spiraling in Wednesday's session after the dollar-store chain missed top- and bottom-line expectations for its second quarter and slashed its full-year outlook.
In the 13 weeks ended August 3, Dollar Tree's revenue increased 0.7% to $7.4 billion, helped by a 0.7% improvement in same-store sales growth. Its earnings per share (EPS) decreased 26.4% from the year-ago period to 67 cents.
The "vast majority" of the earnings slump was "attributable to an adjustment of our general liability accrual, a portion was attributable to a comparable-store-sales shortfall which reflected the increasing effect of macro pressures on the purchasing behavior of Dollar Tree's middle- and higher-income customers," said Dollar Tree Chief Financial Officer Jeff Davis in a statement.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The results came up short of analysts' expectations. Wall Street was anticipating revenue of $7.5 billion and earnings of $1.04 per share, according to Yahoo Finance.
As a result of its weak performance in the first half and "a more conservative sales outlook at Dollar Tree for the balance of the year," the company cut its full-year outlook.
It now anticipates revenue in the range of $30.6 billion to $30.9 billion, comparable-store sales growth in the low-single-digits and earnings per share to arrive between $5.20 to $5.60.
This compares with Dollar Tree's previous outlook of revenue in the range of $31 billion to $32 billion, comparable-store sales growth in the low-to-mid-single digits, and earnings per share of $6.50 to $7.00.
Is Dollar Tree stock a buy, sell or hold?
Similar to its peer Dollar General (DG), which recently suffered its worst day ever after earnings, Dollar Tree has struggled on the charts this year, down 54% so far. Yet, Wall Street remains bullish on the consumer staples stock.
According to S&P Global Market Intelligence, the average analyst target price for DLTR stock is $131.13, representing implied upside of roughly 100% to current levels. Meanwhile, the consensus recommendation is a Buy. However, analysts may very well revise their ratings and price targets lower following the earnings miss and reduced guidance.
Financial services firm UBS Global Research is one of the more bullish outfits on DLTR stock with a Buy rating and $155 price target.
“We believe the DLTR story remains compelling," said UBS analyst Michael Lasser in an August 29 note.
Lasser says there are several potential catalysts for Dollar Tree, including it being a beneficiary to moderating inflation or deflation in some categories, its rollout of higher shelves and merchandising resets, its expansion of multi-price assortment, and an improvement in profitability from its portfolio review of its Family Dollar brand.
However, the analyst adds that "the market probably won't recognize these favorable attributes until estimates stop moving lower."
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.
-
Should You Get a Long-Term or Short-Term CD Before the Next Fed Meeting?
Is a long-term or short-term CD better to open before the Fed's next meeting? Here's what you need to know.
By Erin Bendig Published
-
This Double-Dip Trust Benefit Really Is Too Good to Be True
Let's clear up the confusion among some trust makers and taxpayers over how grantor trust status affects the step-up in basis and estate tax exclusion.
By Rustin Diehl, JD, LLM Published
-
This Double-Dip Trust Benefit Really Is Too Good to Be True
Let's clear up the confusion among some trust makers and taxpayers over how grantor trust status affects the step-up in basis and estate tax exclusion.
By Rustin Diehl, JD, LLM Published
-
How to Structure Retirement Income to Tamp Down Taxes
From Social Security to IRAs and investments, with smart tax planning, retirees can have some control over how much of their income they'll get to keep.
By Rick Barnett, CEPP, CFCA, MEP Published
-
5 Stocks to Buy for a Harris Presidency
The race for the White House is heating up and these five stocks are set to benefit if Kamala Harris claims victory.
By Will Ashworth Published
-
Four Key Elements of a Good Estate Plan
An estate plan can be complex or simple, depending on your estate and your wishes, but every estate plan should accomplish these basic goals.
By John Goralka Published
-
Stock Market Today: Stocks Rise as Fed Rate Cuts Near
The main indexes closed out the day and week notably higher as excitement swirls ahead of next week's rate cut.
By Karee Venema Published
-
Four Common Misconceptions About Life Insurance
Just because you have no dependents and no debt doesn't mean life insurance wouldn't come in exceedingly handy for someone in your life or even a charity.
By Karl Susman, CPCU, LUTCF, CIC, CSFP, CFS, CPIA, AAI-M, PLCS Published
-
Should You Keep Your 401(k) When You Retire?
Here are three primary reasons you might want to consider moving your retirement money from your 401(k) to an IRA once you retire.
By Joe F. Schmitz Jr., CFP®, ChFC® Published
-
Want to Move to Italy? What to Consider Financially
Once you've decided that you and Italy are compatible, you'll want to work out your tax planning, investments, retirement accounts and benefits.
By Alex Ingrim, Chartered MCSI Published