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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowDollar Tree is slashing its full-year earnings and sales forecasts as its customers continue to struggle with higher prices and spend less.
Shares tumbled 20% Wednesday after hitting a 52-week low on the prior day. Less than a week ago, shares of rival bargain chain Dollar General had their biggest one-day decline ever after a dismal quarter.
Dollar Tree said that it now expects full-year adjusted earnings between $5.20 and $5.60 per share. Its prior outlook was for $6.50 to $7 per share.
The Chesapeake, Virginia-based company also projected annual sales in a range of $30.6 billion to $30.9 billion, down from $31 billion to $32 billion.
Analysts polled by FactSet expect full-year earnings of $6.56 per share on revenue of $31.17 billion.
Dollar Tree has been trying to lure customers from other retailers with rock-bottom prices, but juggernauts like Walmart and Target have also said their customers are under pressure and they’re cutting prices, too.
Dollar Tree’s second quarter revenue was $7.38 billion. Its adjusted revenue was $7.37 billion, which is short of the $7.5 billion that analysts surveyed by Zacks Investment Research expected.
Dollar Tree earned $132.4 million, or 62 cents per share, for the period ended Aug. 3. Stripping out certain items, earnings were 67 cents per share, which fell far short of Wall Street expectations of $1.03 per share.
Chief Financial Officer Jeff Davis said in a prepared statement that the company’s per-share earnings came up short partly due to the economic pressure on its middle- and higher-income customers. Last week, Dollar General said it was its lower-income customers that were feeling the most pressure.
Dollar Tree Chief Operating Officer Mike Creden said during the company’s conference call early Wednesday that financial pressures are spreading upward to higher-earning customers.
“Dollar Tree has a broader customer base that includes more middle and upper-income households and beginning this quarter, we started to see inflation, interest rates, and other macro pressures have a more pronounced impact on the buying behavior of these customers,” Creden said.
Even though inflation is slowing, many Americans remain unhappy with today’s sharply higher prices for such necessities as gas, food and housing compared with their pre-pandemic levels. Many have cut spending on nonessentials to save money for things like groceries.
For the third quarter, Dollar Tree anticipates adjusted earnings between $1.05 and $1.15 per share, with revenue in a range of $7.4 billion to $7.6 billion. Analysts polled by FactSet expect earnings of $1.31 per share on revenue of $7.58 billion.
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Oh no, people learned about shrinkflation and stopped buying tons of excessive packaging on tiny portions? A tragedy.
Charles, tell everyone that you live in your own economy bubble without telling everyone. Dollar stores are an absolute lifeline in rural areas and in urban areas serve as a main source for lower income people. Some folks cannot afford “large package” items, so they are restricted to small/frequent purchases on their budget. But even those places are feeling the squeeze of the last 3 years of inflation, as are their customers.
S.B. I think you misunderstood his comment. I took it to mean as people are wising up to shrinkflation on their purchases which is they’re getting less and less but still paying the same amount. In other words it may go down from 10 oz in a package down to 8 oz but the box is still the same size but yet the price stays the same
It’s pretty terrible that dollar stores have become so important in rural areas. They don’t actually end up much cheaper – if at all – than the locally owned shops that they replace. But dollar stores are a consequence of the government sending small business owners & Main Streets down the river in favor of highways & tax breaks for the Walmarts of the world.
Robert +1, absolutely.
Rhea, thank you. Charles, if that is the case, then my apologies, I read your comment as a dig against consumers who are forced, either due to financials and/or location, to rely on these stores.
I agree totally with Dollar tree and Dollar general being a lifeline for people. Lately though I’ve noticed that Dollar general is much higher in prices than Kroger Walmart or Meijer on some items. Their milk is always higher than any of the grocery store chains and for the Dollar general markets their meat is always extremely high. And they don’t run near the sales that they used to. I have family members who actually purchase a majority of their groceries from Dollar tree because sometimes they can’t even afford the lowest priced item at the grocery store and the smaller packaging of mayonnaise and mustard and other items at Dollar tree make it more affordable for them.
Rhea – 100% agree, they should not be mistaken for the lowest cost. Their niche is proximity. People without vehicles in urban areas, and for rural folks that can’t or won’t drive round trip 1 to 1.5 hours to a grocery store. They do also have a niche for “saving” per transaction, with smaller batches, which is one reason they like growth, they can demand specialty product sizes by volume.