Dollar Tree’s Q2 Earnings Miss the Mark; Shares Plunge More Than 7%

Discount retailer Dollar Tree, Inc.(NASDAQ:DLTR) this morning posted Q2 earnings results that missed Wall Street’s view, despite huge sales growth.

Investors headed to the exits on DLTR shares as a result, sending the stock down more than 7% prior to the market open.

The Chesapeake, VA-based company reported Q2 adjusted net income of $0.72 per share, narrowly missing Wall Street estimates of $0.73. Revenue rose 66% from last year to $5 billion, driven by new store openings. Analysts expected slightly higher sales of $5.08 billion.

Same-store sales rose 1.2% from last year, versus a 2.7% gain in the same period a year ago.

Looking ahead, DLTR forecast Q3 EPS of $0.76-0.82, which straddles analysts’ view of $0.77. The company’s Q3 revenue forecast of $5.02-5.1 billion would miss Wall Street estimates of $5.13 billion.

Dollar Tree lifted its full-year earnings outlook to a range of $3.67-3.82 (up from a prior $3.58-3.80), while analysts are looking for $3.79 per share for the year. The company guided full-year revenue below estimates, however.

From the press release:

Bob Sasser, Chief Executive Officer, stated, “I am very pleased with the Company’s overall performance in our second quarter. Through what continues to be a challenging retail sales environment, we delivered gross margin improvement and managed expenses effectively to deliver earnings at the top end of our guidance range. In our Dollar Tree segment, we improved our operating margin and delivered our 34th consecutive quarter of positive same-store sales.”

Sasser added, “Just over a year ago, we completed our acquisition of Family Dollar and our integration continues to progress as planned. The stores are cleaner, the values are greater and our merchandise assortments are improving. Additionally, we are taking the necessary steps to develop our shared services support model, and are continuing our focus on cost-related synergy capture. As a combined organization, we are well-positioned to better serve more customers, generate significant cash flows and deliver long-term value to our shareholders.”

DLTR-2016-08-25

Dollar Tree shares fell $6.91 (-7.28%) to $88.02 in premarket trading Thursday. Prior to today’s report, the stock had gained nearly 23% year-to-date.

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