Dollar Tree has trimmed its full-year sales forecast after missing third-quarter estimates, indicating that persistent inflation was weighing on demand for non-essential products at its stores.
As higher food prices, borrowing costs and rising credit card debt hammers household budgets, customers are curtailing the purchase of higher-margin discretionary items such as party products and toys.
Several US retailers including Walmart, Best Buy and Lowe's have also sounded caution in recent weeks about spending during the crucial holiday season, which is expected to grow this year at its slowest pace in five years.
Dollar Tree's gross margins were down 20 basis points at 29.7% in the quarter as it grappled with a spiralling supply chain, wages and raw material expenses.
“Our third-quarter results were within our expectations thanks to continued execution across all aspects of our business transformation,” said Rick Dreiling, chair and chief executive officer said in a statement. “In a challenging environment, our performance was among the best in retail as we continue to grow traffic, unit, and sales per square foot.”
Outlook
Dollar Tree – known for selling everything from cosmetics to homeware at discounted prices – has also been struggling with higher retail shrink, where inventory is either lost, damaged or stolen.
The company now expects fiscal 2023 consolidated net sales to be between $30.5 billion and $30.7 billion (€27.86 billion and €27.99 billion), compared with a prior estimate of $30.6 billion to $30.9 billion (€27.86 billion to €28.17 billion).
The discount-store chain also said it expects per share profit in the range of $5.81 to $6.01 in fiscal 2023, compared with its prior outlook of between $5.78 and $6.08. Analysts expect a profit of $5.97 per share.
Dollar Tree logged total sales of $7.31 billion (€6.65 billion) in the third quarter, below estimates of $7.4 billion (€6.74 billion), according to LSEG data.
On an adjusted basis, the company earned a profit of $1.02 per share for the quarter, compared with estimates of $1.01, according to LSEG data.
News by Reuters, additional reporting by ESM.
