What to expect when Dollar Tree (DLTR) reports Q2 2023 earnings

Shares of Dollar Tree, Inc. (NASDAQ: DLTR) were down 1% on Monday. The stock has dropped 11% over the past three months. The discount retailer is slated to report its earnings results for the second quarter of 2023 on Thursday, August 24, before market open. Here’s a look at what to expect from the earnings report:

Revenue

Dollar Tree has guided for net sales of $7.0-7.2 billion for the second quarter of 2023. Analysts are projecting revenue of $7.18 billion for Q2, which would represent a 6% growth from the same period last year. In the first quarter of 2023, consolidated net sales increased 6.1% year-over-year to $7.32 billion.

Earnings

Dollar Tree expects EPS to range between $0.79-0.89 in Q2 2023. Analysts are predicting EPS of $0.87 for the second quarter, which compares to $1.60 reported in the year-ago period. In Q1 2023, adjusted EPS fell 38% YoY to $1.47.

Points to note

Dollar Tree has guided for a mid-single-digit increase in same-store sales for the enterprise, as well as for its Dollar Tree and Family Dollar divisions. In Q1, enterprise same-store sales increased 4.8%. Same-store sales at the Dollar Tree and Family Dollar segments rose 3.4% and 6.6% respectively, driven by higher traffic.  

The company can be expected to benefit from its ability to provide cost-conscious customers with value through its wide and affordable product assortment. Customers are spending more on consumables, driving growth in that category, which is benefiting the top line. However, the discretionary category is likely to face pressure.

The mix shift towards consumables has been impacting margins. This may have continued into the second quarter. The company believes consumer shopping behavior will normalize over time, which will bring about a recovery in margins. Higher levels of shrink are also expected to take a toll on margin performance.