Dollar Tree, Inc.’s (DLTR) stock is taking a significant hit in pre-market trading after the company announced disappointing second-quarter 2024 earnings. The discount variety store chain missed analyst expectations on both earnings and sales, leading to a substantial drop in share price.
Dollar Tree reported an adjusted earnings per share (EPS) of $0.67, falling short of the consensus estimate of $1.04. This represents a 26.4% decline compared to the same period last year. The company’s Chief Financial Officer, Jeff Davis, attributed the shortfall to an adjustment in general liability accrual and a decline in sales due to macroeconomic pressures affecting the spending habits of Dollar Tree’s middle- and higher-income customers.
Sales for the quarter also lagged behind expectations, reaching $7.38 billion, a marginal 0.07% increase compared to the previous year. This fell short of the consensus forecast of $7.5 billion. The company’s same-store sales growth was also underwhelming, with Dollar Tree reporting a 1.3% increase, Family Dollar showing a slight decline of 0.1%, and the Enterprise segment experiencing a growth of 0.7%.
Adding to investor concerns, Dollar Tree announced it is exploring strategic alternatives for its Family Dollar business segment. This could involve a potential sale, spin-off, or other disposition of the business. The company is clearly seeking to address the underperformance of this segment.
Dollar Tree’s lowered full-year fiscal 2024 guidance further fueled the sell-off. The company now expects consolidated net sales to be between $30.6 billion and $30.9 billion, down from its previous projection of $31 billion to $32 billion. This revised guidance reflects the disappointing second-quarter results, including the general liability charge, a more conservative sales outlook for the remainder of the year, and start-up costs associated with the integration of recently acquired 99 Cents Only Stores leases.
Despite the challenges, Dollar Tree anticipates delivering low-single-digit comparable store net sales growth for the enterprise and both the Dollar Tree and Family Dollar segments for the full year. The company expects adjusted diluted EPS to be between $5.20 and $5.60, a significant reduction from its prior guidance of $6.50 to $7.00.
For the third quarter of 2024, Dollar Tree forecasts sales in the range of $7.4 billion to $7.6 billion, with low single-digit comparable store net sales growth. Adjusted diluted EPS for the third quarter is expected to be between $1.05 and $1.15.
The market’s reaction to these announcements has been swift and severe. DLTR stock is down 11.8% at $72 during the pre-market session, demonstrating investor concerns about the company’s future prospects.
