Dollar Tree Stock Takes a Nosedive After Disappointing Second Quarter

Discount retailer Dollar Tree reported lower-than-expected earnings for the second quarter, pushing its share price off a cliff. Adjusted earnings per share were 67 cents, a 26.4% drop year over year and well below the company’s projected $1.00 to $1.10.

Dollar Tree updated its full-year earnings outlook to $5.20 to $5.60 per share, down from $6.50 to $7.00. Net sales will likely be between $30.6 billion and 30.9 billion, lower than the previous $31 billion to $32 billion estimate.

Reported sales for the quarter, which ended on Aug. 3, were $7.38 billion, a slight uptick of 0.07%. Dollar Tree same-store sales grew 1.3%, but Dollar Tree-owned Family Dollar fell 0.1%.

“Clearly, we are not pleased with our second quarter results or having to revise our full year outlook,” said Dollar Tree’s Chief Operating Officer Mike Creedon, per Forbes.

After the Q2 report, Dollar Tree stock fell 22% to $63.56, the lowest since November 2015. The decline mirrors the results of other national dollar store chains, as Dollar General is down 39% for the year alongside Five Below’s year-to-date loss of 65%.

Over the past several years, Dollar Tree has been one of the fastest-growing retailers, but inflation, job market woes, and increased borrowing costs have dragged it down. The company’s target customers, low-to-middle-income households, are having trouble making ends meet.

“And beginning this quarter, we started to see inflation, interest rates and other macro pressures have a more pronounced impact on the buying behavior of these customers,” Creedon said on a Wednesday earnings call.

Competition from large rivals like Walmart and Target are likely luring customers away from Dollar Tree. Earlier this year, Walmart announced price cuts on almost 7,000 items. Target quickly followed by slashing prices on 1,500 staple products like laundry soap and cat food, with plans to extend this to 5,000 items by the end of the summer. Many of the price reductions were on products many customers typically purchase at Dollar Tree.

In March, Dollar Tree announced a plan to close 970 poor-performing Family Dollar stores. As of the end of the second quarter, 655 locations have been shuttered, with another 45 on the chopping block by the end of fiscal 2024.