Dollar Tree Inc forecast weak first-quarter sales and profit on Wednesday, citing higher discounts and tariff pressures.
The discount retailer also struggled to attract shoppers to its Family Dollar stores, which resulted in its same-store sales missed Wall Street estimates for the fourth quarter.
Managing director of GlobalData Retail, Neil Saunders, commented, "Much of this relates to assortments which, while OK, were far from compelling in areas like gifting. From our channel checks, the company made nowhere near enough effort to source interesting items and merchandising was hit and miss.
"As a result, the firm missed out on some gift spending as customers migrated elsewhere. The problem was particularly acute at Family Dollar stores, where the non-consumable offer remains weak and in desperate need of improvement."
Tariffs And Promotional Activity
Chief executive Officer Gary Philbin said the pressure from the tariffs and promotional activity will be limited to the first quarter and the company is well-positioned for the rest of the year.
It forecast net sales between $5.89 billion and $5.99 billion and low single-digit growth in same-store sales. Analysts were expecting net sales of $6.02 billion for the current quarter.
The company also forecast earnings per share between $1 and $1.09, including tariff costs, which was below the analysts' average estimate of $1.20.
In the reported quarter, same-store sales rose 0.4%, falling short of the analysts' average estimate of 1.71%, according to IBES data from Refinitiv.
The company reported net income of $123 million, or 52 cents per share, compared with a loss of $2.3 billion, or $9.69 per share, a year earlier, when it took a $2.7 billion writedown for its Family Dollar business.
Saunders added, "Overall, the outlook for Dollar Tree is good. The group is investing and making changes which are necessary to create growth. It is doing so against an increasingly competitive backdrop.
"However, the general environment remains helpful to value players and we believe that Dollar Tree Plus and the improvements at Family Dollar will allow the group to attract a wider cross-section of shoppers. In the short term some pressure from tariffs and coronavirus may push down profits but these are only transitory concerns."
News by Reuters, additional reporting by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.