Dollar Tree stock slides on lowered annual EPS outlook
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Dollar Tree (NASDAQ:DLTR) shares dropped as much as 9% pre-market on Thursday after the variety retail firm lowered its earnings guidance for full-year 2022.
The Chesapeake, Virginia-based company lowered earnings per share outlook to $7.10 - $7.40 from $7.80 to $8.20 previously. The consensus EPS estimate for the year is $8.19.
Management commentary: "Competitive pricing at Family Dollar will over the long term enhance our sales productivity and profitability, and ultimately our opportunity to accelerate store growth. We are therefore making an investment in pricing at Family Dollar [...] We expect the combination of this pricing investment at Family Dollar and the shoppers' heightened focus on needs-based consumable products will pressure gross margins in the back half of the year. We have therefore reduced our EPS outlook accordingly."
The management further noted that margin performance and outlook are being hurt by inflationary cost pressures, a material shift in consumer purchasing from higher-margin discretionary merchandise to lower-margin consumable goods and continued investments in labor, wages and store conditions.
Consolidated net sales for the year are now expected to range from $27.85B to $28.1B vs. $28.11B consensus, with slightly higher comps offset by slightly reduced square footage growth relative to prior outlook.
For Q2, the company generated record EPS of $1.60 on consolidated net sales of $6.77B (+6.7% Y/Y). Comparable store net sales grew 7.5% or 7.4% when adjusted for currency fluctuations, while gross margin improved 200 basis points to 31.4%, due to improved initial mark-on and leverage on distribution and occupancy costs.

Dollar Tree (DLTR) also announced a key executive leadership addition, with Jeffrey Davis joining the organization as CFO. Davis will succeed Kevin Wampler who will transition out of his role as CFO and is expected to remain with the company as an advisor until April 2023 to ensure a smooth transition.