Categories Analysis, Retail

Dollar Tree (DLTR) to report Q1 earnings on June 5. Here’s what to expect

The company is planning to close several underperforming Family Dollar stores amid inflation woes and macro uncertainties

Dollar Tree, Inc. (NASDAQ: DLTR) is scheduled to publish first-quarter earnings next week, amid expectations for a mixed outcome. The discount store chain has remained mostly resilient to the inflation-induced dip in consumer sentiment by including higher-value merchandise and attracting a wider customer demographic.  

The performance of Dollar Tree shares has not been very encouraging this year, as they lost about 20% so far. The stock has gone through a series of ups and downs in recent months and is currently trading at a six-month low. Analysts are optimistic in their outlook on DLTR, with the average target price indicating strong growth in the 12 months.

The retailer’s first-quarter 2024 earnings report is slated for release on Wednesday, June 5, at 6:30 am ET. Experts believe that bottom-line performance weakened compared to both the year-ago quarter and the previous quarter. They are looking for adjusted earnings of $1.42 per share for Q1, vs. $1.47 per share a year earlier. Meanwhile, the company’s management is looking for earnings in the range of $1.33 per share to 1.48 per share for Q1.

Sales Forecast

The consensus sales forecast is $7.63 billion, which represents a 4% increase from the first quarter of 2023. The company is projecting net sales in the range of $7.6 to 7.9 billion for the quarter, based on a low-to-mid-single-digit increase in same-store sales for the enterprise. In the trailing two quarters, both sales and earnings missed the Street view.

Dollar Tree is preparing to close several underperforming stores this year, mostly Family Dollar outlets, with more store closures planned in the coming years as elevated inflation and labor market uncertainties continue to affect the finances of its price-conscious customers. Another reason behind the decision is the growing incidents of shoplifting. As the company maintains its low-price strategy despite higher costs, it faces pressure on margins and may be required to change its product selection going forward.

Commenting on streamlining the store network, Dollar Tree’s CEO Rick Dreiling said at the last earnings call, “As part of the portfolio review process, we have identified approximately 600 Family Dollar stores that we will close in the first half of fiscal 2024. Additionally, approximately 370 more Family Dollar and 30 Dollar Tree stores will close at the end of each store’s current lease term. We believe rationalizing these unprofitable locations will help to unlock meaningful value at the enterprise level. Collectively, we estimate that net sales loss from the stores we intend to close this year is approximately 730 million on an annual run rate basis.”

Positive Outcome

In the final three months of fiscal 2023, the company’s net sales increased 11.9% year-over-year to $8.63 billion. Enterprise same-store net sales were up 3%. That translated into a 25% jump in adjusted earnings to $2.55 per share. On an unadjusted basis, the company reported a net loss of $1.71 billion or $7.85 per share for Q4, compared to net income of $452.2 million or $2.04 per share a year earlier.

Dollar Tree’s stock made modest gains on Thursday afternoon, after opening the session higher. It has traded below the 52-week average in recent weeks.

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