Dollar Tree (DLTR) Stock Drops As Cautious Outlook Overshadows Earnings Beat

TLDR

• Dollar Tree posted Q4 adjusted EPS of $2.56, beating the $2.53 estimate
• Net sales rose 9% to $5.45 billion; comparable sales up 5%
• Q1 guidance came in below Wall Street expectations on both EPS and sales
• Full-year EPS guidance of $6.50–$6.90 straddles the consensus of $6.70
• The stock dropped roughly 3.8% on Monday following the report

Dollar Tree (DLTR) posted a beat on fourth-quarter earnings Monday, but a cautious outlook for the months ahead sent the stock lower.

The discount retailer reported adjusted earnings of $2.56 a share for the quarter ended January 31. That edged past the analyst consensus of $2.53. A year ago, the company had posted a loss of $17.17 a share, so the turnaround was hard to miss.

Dollar Tree, Inc., DLTR

Net sales for the quarter came in at $5.45 billion, up 9% year-over-year and roughly in line with Wall Street models. Comparable sales grew 5%, just above the 4.9% analysts had forecast.

The comp growth was driven by a 6.3% rise in average ticket size. That was partially offset by a 1.2% drop in traffic — meaning customers spent more per visit, but fewer of them showed up.

CEO Mike Creedon pointed to 20 consecutive years of comparable sales growth as proof the chain holds its place as a destination for value and convenience.

Guidance Misses the Mark

The forward outlook is where things got tricky. Dollar Tree guided for Q1 adjusted EPS of $1.45 to $1.60, with a midpoint of $1.52. Analysts had been looking for $1.56.

Sales guidance for the current quarter came in at $4.9 billion to $5.0 billion, versus the $4.96 billion Wall Street expected. Comparable sales growth was projected at 3% to 4%, compared to analyst estimates of 3.6%.

For the full fiscal year, the company sees adjusted EPS of $6.50 to $6.90 on sales of $20.5 billion to $20.7 billion. The consensus sat at $6.70 EPS and $20.66 billion in sales — both within range, but toward the softer end.

Dollar General Set a Similar Tone

Dollar Tree isn’t alone in playing it cautious. Rival Dollar General reported earnings last week and also pointed to a slower sales growth pace for the year ahead.

Dollar General cited recent winter storms as a drag on the current quarter. Broader uncertainty around consumer behavior was flagged as a factor too.

Dollar Tree stock fell 3.8% on Monday. Dollar General was up slightly on the same day.

By mid-morning premarket trading, Dollar Tree had pared back some earlier losses and was trading flat before markets opened. It had been down as much as 2.6% at $104.63 earlier in the session.

The Q4 results mark a sharp swing from the year-ago period, when Dollar Tree recorded a net loss of $3.7 billion — largely tied to one-time charges.

This quarter’s net profit landed at $506.1 million, or $2.53 a share on a reported basis.

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