Dollar Tree Shares Tumble on Weaker Earnings

Published on: 26 Nov, 2019

Dollar Tree (NASDAQ: DLTR) reported its third quarter financial results before the opening bell on Tuesday. The retailer topped revenue estimates, but fell short of earnings estimates, sending shares tumbling by 15%.

For the quarter, Dollar Tree reported earnings of USD 1.08 per share on revenue of USD 5.75 Billion. FactSet analysts expected earnings of USD 1.13 per share on revenue of USD 5.74 Billion.

At the end of the quarter, Dollar Tree reported that revenue increased by 3.7% year-over-year. Enterprise same-store sales increased by 2.5%, while same-store sales for Dollar Tree gained 2.8%. Same-store sales for the Family Dollar segment rose by 2.3%.

Despite the revenue growth year-over-year, Dollar Tree’s operating income slipped during the quarter. Dollar Tree reported operating income of USD 358.4 Million compared to USD 387.8 Million the same period a year ago.

Dollar Tree’s stock was also shaken up after the Company revised its guidance based on the impact of the trade tariffs, contributing to the slump on Tuesday.

“Just prior to the Company’s previous quarterly earnings announcement on August 29, 2019, the United States Trade Representative (USTR) announced that tariffs on List 1, 2, and 3 products would increase from 25% to 30% on October 1, 2019, tariffs on List 4A products would increase from 10% to 15% on September 1, 2019, and tariffs on List 4B products would increase from 10% to 15% on December 15, 2019. As noted in its August 29, 2019 earnings announcement, the outlook provided at that time did not include any impact related to these changes,” said Dollar Tree in a press release.

“The Company now estimates that Section 301 tariffs will increase its cost of goods sold by approximately USD 19 Million, or USD 0.06 per diluted share, in the fourth quarter of 2019 if tariffs are fully implemented.”

Based on the tariffs, Dollar Tree is now forecasting earnings between USD 1.70 to USD 1.80 per share on revenue in the range of USD 6.33 Billion to USD 6.44 Billion for the fourth quarter. Additionally, the Company is expecting a low single-digit increase in same-store sales.

And as for the full-year, Dollar Tree is anticipating earnings between USD 4.66 to USD 4.76 per share on revenue in the range of USD 23.62 Billion to USD 23.74 Billion. Moreover, Dollar Tree expects same-store sales growth of a low single-digit percentage.

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Bryan Shin

Email: Bryan@financialinsiders.com

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