Why Discount Store Company Dollar Tree's Shares Are Falling Today

Dollar Tree, Inc. DLTR reported third-quarter FY23 sales growth of 5.4% year-on-year to $7.31 billion, missing the analyst consensus of $7.40 billion.

Adjusted EPS of $0.97 missed the consensus of $1.01.

Enterprise same-store net sales increased 3.9%. Dollar Tree same-store net sales increased 5.4%, with 2% growth in Family Dollar.

Gross profit increased 4.9% to $2.17 billion, and gross margin declined 20 basis points to 29.7%. The gross margin decline was driven by unfavorable sales mix, elevated shrink, product cost inflation, product recall, and wage investments in distribution center payroll, partially offset by lower freight.

Operating income was $301.7 million, and operating margin declined 140 bps to 4.1%.

The company exited the quarter with cash and equivalents worth $444.6 million. 

Dollar Tree repurchased 2.18 million shares for $252.3 million in Q3, including applicable excise tax. The company opened 197 new stores.

The company has initiated a comprehensive review of its Family Dollar portfolio to address stores that are not aligned with its transformative vision for the company.

Outlook: Dollar Tree expects Q4 consolidated net sales of $8.6 billion-$8.8 billion vs. $8.73 billion estimate, with EPS of $2.58-$2.78.

Dollar Tree revises FY23 net sales outlook from $30.6 billion-$30.9 billion to $30.5 billion-$30.7 billion (consensus $30.82 billion), revised EPS outlook from $5.78-$6.08 to $5.81-$6.01.

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Price Action: DLTR shares are trading lower by 2.19% at $113.50 in premarket on the last check Wednesday.

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