A sign stands in front of a Dollar Tree and Family Dollar store on March 13, 2024 in Rio Vista, California.
Justin Sullivan | Getty Images
Shares of Dollar tree fell more than 12% in premarket trading on Wednesday after the discounter cut its full-year forecast, saying pressure on middle- and upper-income customers has increased.
The retailer said it now expects its full-year consolidated net sales forecast to be between $30.6 billion and $30.9 billion. It expects adjusted earnings per share to be between $5.20 and $5.60. That compares with its previous guidance of $31 billion to $32 billion in net sales and $6.50 to $7 for adjusted earnings per share.
In a news release, Chief Financial Officer Jeff Davis said the company lowered its guidance to reflect a more conservative outlook, costs associated with remodeling 99 Cents Only stores it recently acquired and general liability charges. The company said it has had higher costs to pay, settle and litigate claims related to customer accidents and other incidents in stores.
Dollar Tree's report comes about a week after its major competitor Dollar General lowered its full-year revenue and profit outlook, sending its shares plummeting. Dollar General CEO Todd Vasos attributed the weak revenue to “a core customer feeling financially constrained.”
Dollar stores in particular have felt the pinch as their core customers — lower-income shoppers with little money to spend on discretionary items — have compromised after a prolonged period of higher food and daily expenses. Walmart has won more business from value-conscious shoppers of all incomes, and newer online players like Temu have also attracted customers with lower-priced merchandise.
Dollar Tree consists of two chains of stores. The chain of the same name sells a wide range of cheaper items, such as party supplies, and Family Dollar has more groceries.
Same-store sales for the company rose 0.7% in the quarter. Dollar Tree saw same-store sales rise 1.3% and Family Dollar saw same-store sales decline 0.1%. The industry metric strips out the impact of store openings and closings.
In addition to dealing with inflation-sensitive shoppers, Dollar Tree has faced business-specific challenges. The retailer announced in March that it would close about 1,000 Family Dollar stores, citing market conditions and store performance. Then in June, the company said it was considering selling the Family Dollar brand.
Dollar Tree acquired Family Dollar in 2015 for nearly $9 billion. Since then, the company has struggled to strengthen its grocery chain and better compete with Dollar General.
By Tuesday's close, Dollar Tree shares are down nearly 43% so far this year. The company's stock hit a 52-week low on Tuesday, closing at $81.65.
