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Dollar Tree cuts outlook as theft hurts bottom line

by SuperiorInvest

Key things

  • Shares of Dollar Tree plunged 12% on Thursday after it reported thefts and changes in consumer habits hurt its profit and outlook.
  • CEO Rick Dreiling said the company was “not immune” to the pressures facing the sector.
  • Other retailers have reported similar problems with theft and inflation affecting shoppers.

Dollar Tree shares (DLTR) plunged 12% on Thursday after the discount chain’s profit beat forecasts and it cut its full-year outlook due to the effects of theft and changing consumer habits.

Dollar Tree reported Q1 earnings per share (EPS) of $1.47, missing estimates by $0.05. Revenue rose 6.1% to $7.32 billion, beating expectations. Same store sale they were up 3.4% at their namesake locations and up 6.6% at Family Dollar stores.

CEO Rick Dreiling explained that Dollar Tree “has not been immune” to external pressures affecting retailers, “especially fringe impact increased shrink and the product mix moves to consumables.”

Dollar Tree’s woes mirror those of others in the sector. Target (TGT) and Foot Locker (FL) recently reported theirs bottom lines would be hurt by shoplifting losses. Off-price stores like Dollar Tree also said inflation is causing shoppers to spend less on more profitable over-the-counter items, reducing earnings.

Dreiling added that the company expects increased attrition and an unfavorable sales mix “to persist through the balance of the year.” Dollar Tree cut its EPS outlook to a range of $5.73 to $6.13, down from $6.30 to $6.80 previously. Revenue is expected to be roughly in line with earlier projections.

Thursday’s selloff sent Dollar Tree shares into negative territory for the year.

YCharts


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