What to expect when Dollar Tree (DLTR) reports Q4 earnings next week

Shares of Dollar Tree Inc. (NASDAQ: DLTR) were down over 2% on Thursday. The stock has dropped 6% over the past three months. The discount retailer is scheduled to report its fourth quarter 2022 earnings results on Wednesday, March 1. Here’s what to expect from the earnings report:

Revenue

Dollar Tree has guided for consolidated net sales of $7.54-7.68 billion for the fourth quarter of 2022. Analysts are projecting sales of $7.6 billion for Q4. This compares to net sales of $7.08 billion reported in Q4 2021. In Q3 2022, consolidated net sales increased 8% year-over-year to $6.94 billion.

Earnings

The consensus target is for EPS of $2.02 in Q4 2022, which compares to EPS of $2.01 reported in Q4 2021. In Q3 2022, EPS increased 25% YoY to $1.20.

Points to note

In an inflationary environment, people tend to turn to discount stores in search of more value. This trend has benefited Dollar Tree and it is likely to have continued in the fourth quarter. In the third quarter, enterprise same-store sales increased 6.5%. Both the Dollar Tree and Family Dollar segments recorded same-store sales growth in Q3. Dollar Tree has projected a mid to high single digit increase in enterprise same-store sales in Q4.

In Q3, Dollar Tree saw more demand for the consumables category than discretionary. This shift has weighed on its margins and it had forecasted this trend to continue in the fourth quarter. The company also continues to face inflationary pressures across several expense categories such as utilities as well as higher costs for store improvements and store payroll.

In January, Dollar Tree appointed Rick Dreiling as its new CEO, replacing Mike Witynski. This signals a new direction for the company and updates on new strategies and changes for FY2023 will be a key point to watch out for.

Also read: Dollar Tree (DLTR) vs. Dollar General (DG): How did the third quarter turn out for these discount retailers?