Dollar Tree, Inc. (DLTR) delivered a disappointing performance in its second quarter of 2024, falling short of both earnings and revenue expectations. The discount variety store chain reported adjusted earnings per share (EPS) of 67 cents, missing the consensus estimate of $1.04 and representing a decline of 26.4% compared to the same period last year. Sales also missed expectations, coming in at $7.38 billion, a slight increase of 0.07% compared to the previous year, but falling short of the consensus estimate of $7.5 billion.
The company attributed the earnings miss to a combination of factors. Chief Financial Officer Jeff Davis highlighted an adjustment to the company’s general liability accrual as a significant contributor to the shortfall. Additionally, he mentioned that the macroeconomic environment is impacting customer spending patterns, particularly among Dollar Tree’s middle- and higher-income customers. This pressure on consumer spending led to a shortfall in comparable sales growth.
Looking ahead, Dollar Tree has forecast sales of $7.4 billion to $7.6 billion for the third quarter of 2024, slightly below the consensus estimate of $7.59 billion. The company expects comparable store net sales growth to be in the low single digits for both the Dollar Tree and Family Dollar segments. Adjusted diluted EPS for the third quarter is projected to be between $1.05 and $1.15, compared to the consensus estimate of $1.32.
Investors reacted negatively to the earnings report, sending Dollar Tree shares plummeting by 22.2% to close at $63.56 on Wednesday. Following the announcement, several analysts adjusted their price targets and ratings for Dollar Tree. BMO Capital analyst Kelly Bania downgraded the company’s rating from Outperform to Market Perform and reduced the price target from $130 to $68. Piper Sandler analyst Peter Keith maintained a Neutral rating but also lowered the price target from $112 to $67.
These adjustments highlight the concerns among analysts regarding Dollar Tree’s future prospects given the recent earnings miss and the challenging macroeconomic environment.
