An indication hangs outside a Dollar Tree and Family Dollar store in Rio Vista, California on March 13, 2024.
Justin Sullivan |
Shares of Dollar Tree fell about 10% in premarket trading on Wednesday after the discounter cut its full-year forecast, citing increasing pressure on middle- and upper-income customers.
The retailer now expects consolidated net sales for the complete yr to be between $30.6 billion and $30.9 billion. Adjusted earnings per share are expected to be between $5.20 and $5.60. The previous forecast was for net sales of $31 billion to $32 billion and adjusted earnings per share of $6.50 to $7.
In a Press release, Chief Financial Officer Jeff Davis said the corporate lowered its forecast to reflect a more conservative outlook and the prices related to converting the recently acquired 99 Cents Only stores.
Davis attributed a lot of the blame for lower earnings per share within the quarter to general liability claims. The company said it had higher costs to reimburse, settle and litigate claims related to customer accidents and other incidents in stores.
He said Dollar Tree also saw declining sales as customers of all income levels became more cautious about their purchases.
Dollar Tree’s report comes about every week after its major competitor Dollar-General The full-year sales and profit forecast was drastically cut, causing the stock to plummet. Dollar General CEO Todd Vasos attributed the weak sales to “a core customer feeling financially constrained.”
Dollar stores specifically have suffered pressure as their core customers – lower-income shoppers with little money left for non-essentials – are compromising after a chronic period of dearer groceries and on a regular basis expenses. Walmart has gained more customers from price-conscious shoppers of all income levels, and newer online players like Temu have also attracted customers with cheaper goods.
Dollar Tree owns two chains of stores: the namesake store, which sells a big selection of low-priced items resembling party supplies, and the Family Dollar store, which offers more groceries.
The company’s revenue increased 0.7% within the quarter. At Dollar Tree, revenue increased 1.3% and at Family Dollar, revenue decreased 0.1%. The industry metric excludes the impact of store openings and closings.
Dollar Tree is just not only scuffling with inflation-plagued customers, but in addition with company-specific challenges. The retailer announced in March that it would close about 1,000 Family Dollar storesciting market conditions and store performance. Then, in June, the corporate said it was considering selling the Family Dollar brand.
Dollar Tree bought Family Dollar in 2015 for nearly $9 billion and has been fighting ever since to strengthen the grocery chain and higher compete with Dollar General.
Through Tuesday’s close, Dollar Tree shares have fallen nearly 43% this yr. The company’s stock hit a 52-week low on Tuesday, closing the day at $81.65.
