Stock Plummets As Dollar Tree's Guidance Falls Short Of Earnings Expectations

The shares of Dollar Tree DLTR +1.98% are up on Wednesday following the discount retailer's positive fourth-quarter earnings announcement.

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According to a Trade Algo poll, Dollar Tree's (ticker: DLTR) fourth-quarter earnings of $2.04 per share beat analysts' expectations of $2.02 and its revenues of $7.7 billion beat forecasts for $7.6 billion.

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Sales for the first quarter are expected to be between $7.2 billion and $7.4 billion, slightly exceeding predictions, but earnings per share are expected to be between $1.46 and $1.56, which is less than the $1.84 estimate.

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Dollar Tree anticipates earnings per share for the current fiscal year to be between $6.30 and $6.80, significantly less than the $7.58 that analysts had predicted. The estimated range for sales was $29.9 billion to $30.5 billion, slightly exceeding expectations. According to the company, same-store sales will grow by low- to mid-single-digit percentages this year. In the first half of the fiscal year, margins are anticipated to decrease; however, in the second half, they are anticipated to increase.

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In early trading on Wednesday, Dollar Tree shares are up 4% to $151.11, recovering premarket losses.

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We expected a reset [in outlook], but this morning's was undoubtedly bigger than expected, according to Oppenheimer analyst Rupesh Parikh. He assigns the stock of Dollar Tree a Perform rating without a price objective.

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Under the leadership of current CEO and former executive chairman Rick Dreiling, Dollar Tree has released its first earnings report. The latest in a string of high-level management changes at the company since investor Mantle Ridge launched an activist campaign in November 2021, Dreiling became CEO of the company in late January after outgoing CEO Michael Witynski announced his resignation. As part of a deal with Mantle Ridge, Dreiling began working as chairman for Dollar Tree in March 2022.

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After several quarters of poor performance, Dollar Tree has been attempting to catch up to rival Dollar General DG -0.76% (DG). The company has implemented further steps to improve outcomes in addition to the management changes, such as raising prices at Dollar Tree from $1 to $1.25.

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In the earnings announcement, Dreiling stated, "We have undergone a substantial amount of change in less than a year, and we think we have the team in place to capitalize on the opportunity ahead of us. “We are sure that the increased investments mentioned will alter our Company, will enable and propel us through years of faster growth and margin improvement.