Dollar Tree disappoints

Dollar Tree joined Dollar General on Thursday in blaming bad weather for coming up short in its first quarter.

Net income decreased to $160.5 million and earnings per share was $0.67 in the quarter ended, compared to $0.85 in the prior year’s quarter. Adjusted earnings per share improved 21.4% to an adjusted $1.19, missing analysts expectations of $1.23.

Consolidated net sales increased 5.0% to $5.55 billion. Total same-store sales increased 1.4%, missing analysts’ expectations. Same-store sales increased 4.0% at Dollar Tree. Comp sales fell 1.1% at Family Dollar.

“Our teams worked hard to deliver top-line sales and bottom-line earnings results within our range of guidance, despite headwinds related to increasing freight costs, colder-than-normal spring weather in many parts of the country and an earlier Easter holiday,” stated Gary Philbin, president and CEO. “While weather impacted the discretionary side of our business in the first quarter, we have seen an acceleration in sales with warmer weather in May.”

Analyst Neil Saunders, managing director of GlobalData Retail, commented that the challenge for Dollar Tree is to transform the Family Dollar experience so that it is more compelling and stimulates greater levels of loyalty.

“As much as we applaud the company's efforts to-date, including the store reformats and the introduction of new private labels, we believe that there is a lot more work to do on fixing up this side of the business,” Saunders said. “That said, with the benefits of tax windfalls now fading and with gas prices rising, it is likely that some of the shoppers who temporarily migrated away from Family Dollar will return over the remainder of this year.”

Dollar Tree lowered its full-year EPS guidance from a previous range of between $5.25 and $5.60 to a new range of between $4.80 and $5.10. The retailer said it expects full-year revenue of between $22.73 billion and $23.05 billion compared to previous guidance of between $22.70 billion and $23.12 billion.

Dollar Tree operated 14,957 stores across 48 states and five Canadian provinces as of May 5, 2018. Stores operate under the brands of Dollar Tree, Family Dollar, and Dollar Tree Canada.