Dollar Tree, Inc. (DLTR) is poised to release its second-quarter fiscal 2024 earnings on Sept. 4, with analysts anticipating top-line growth despite lingering headwinds. The Zacks Consensus Estimate for revenues is set at $8.5 billion, indicating a 2.5% increase from the previous year’s quarter. The bottom line is also projected to improve year-over-year, with the Zacks Consensus Estimate for earnings pegged at $1.03 per share, representing a 13.2% rise from the year-ago period.
While the consensus earnings estimate has edged down slightly in recent days, Dollar Tree’s trailing four-quarter average earnings surprise stands at a modest -1.3%. The company’s last reported quarter saw earnings align with Zacks Consensus Estimate.
Looking ahead, Dollar Tree’s second-quarter performance is expected to reflect ongoing pressures from subdued demand for discretionary items, driven by reduced spending among low-income consumers. Management has highlighted that elevated shrink and unfavorable mix are anticipated to remain headwinds in the first half of fiscal 2024. Compounding these challenges, the company has been navigating product cost inflation. These factors are expected to have collectively impacted both top and bottom-line performance in the fiscal second quarter.
During the previous earnings call, management projected a 1-3% year-over-year decline in net sales for the Family Dollar segment during the second quarter. DLTR also anticipates consolidated net sales in the range of $7.3-$7.6 billion, predicated on low to low-single-digit comparable store sales (comps) growth for the enterprise. Comps are expected to rise 2-4% for the Dollar Tree banner while remaining nearly flat for the Family Dollar banner.
While facing headwinds, Dollar Tree has been actively pursuing initiatives to mitigate challenges and drive growth. These include a multi-price point strategy, restructuring and expansion efforts, and optimization of its store portfolio through openings, renovations, re-banners, and closures. These actions have contributed to consistent sales growth across various segments and market share gains. Dollar Tree’s digital and omnichannel capabilities, coupled with its same-day delivery service through Instacart, are expected to have fueled traffic trends in the second quarter.
From a valuation perspective, Dollar Tree’s shares present a compelling opportunity, trading at a discount relative to historical and industry benchmarks. The company’s forward 12-month price-to-earnings ratio of 11.87X falls below its five-year median of 18.17X and the Retail-Discount Stores industry average of 30.9X, underscoring its value appeal for investors seeking exposure to the sector. This is further substantiated by the stock’s Value Score of A.
Despite the challenges, Dollar Tree’s strategic initiatives and its commitment to enhancing its customer experience are likely to contribute to its ongoing growth trajectory. Investors will be closely watching the company’s Q2 earnings report to gauge its progress in navigating the current economic environment and to glean insights into its future prospects.
