Dollar Tree (DLTR): A look at the discount retailer’s expectations for the near term

Shares of Dollar Tree Inc. (NASDAQ: DLTR) were down over 1% on Tuesday. The stock has dropped 5% over the past one month. The company delivered revenue and earnings growth for the fourth quarter of 2022, along with an increase in same-store sales. Here’s a look at the discount retailer’s expectations for the near term:

Revenue

Dollar Tree’s consolidated net sales increased 9% year-over-year to $7.72 billion in the fourth quarter of 2022. Net sales in its namesake banner rose 8% to $4.3 billion while sales in the Family Dollar banner grew 10% to $3.4 billion in the quarter.

For the first quarter of 2023, Dollar Tree expects net sales to range between $7.2-7.4 billion. For the full year of 2023, consolidated net sales are expected to be $29.9-30.5 billion.

Same-store sales

In Q4, enterprise same-store sales rose 7.4%. Same-store sales for the Dollar Tree banner increased 8.7%, driven by a 10% increase in average ticket which was partly offset by a 1% drop in traffic. Family Dollar’s same-store sales rose 5.8%, helped by 5.3% increase in average ticket and a 0.5% rise in traffic.

For the first quarter of 2023, the company expects a mid-single digit increase in enterprise same-store sales, with a low single-digit comp increase at the Dollar Tree banner and a mid-single digit comp increase at the Family Dollar banner.

For the full year of 2023, the discount retailer expects to see a low to mid-single-digit comparable store sales increase, comprised of a low single-digit increase in the Dollar Tree segment and a mid-single digit increase in the Family Dollar segment.

Profits and margins

In Q4 2022, Dollar Tree delivered EPS of $2.04, which was up 1.5% year-over-year. Gross margin improved by 70 basis points to 30.9% while operating margin dropped by 20 basis points to 8%.

The company expects EPS to range between $1.46-1.56 in the first quarter of 2023. For the full year, EPS is estimated to be $6.30-6.80. Dollar Tree expects gross and operating margins to decline in the first half of 2023 and then see a pickup during the second half.

Click here to read the full transcript of Dollar Tree’s Q4 2022 earnings conference call