Dollar Tree sheds 2% after issuing light profit guidance
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Dollar Tree (NASDAQ:DLTR) dropped in early trading on Wednesday after topping estimates with its Q4 earnings report, but issuing cautious profit guidance.
Enterprise same-store sales increased 7.4% during the quarter to top the consensus expectation of +5.7%. Dollar Tree same-store sales increased 8.7%, driven by a 10.0% increase in average ticket, partially offset by a 1.1% decline in traffic. Dollar Tree stores that fully lapped the rollout of Break-the-Dollar produced a 3.0% same-store sales increase in the quarter, and sequentially increased same-store sales in each month throughout the quarter. Of note, stores which had not lapped the Break-the-Dollar produced an 11.6% same-store sales increase in the quarter, a significant sequential improvement for the second consecutive quarter. Traffic improved 410 basis points sequentially compared to the prior quarter and is now trending positively as the company has cycled the transition to a $1.25 price point. Same-store sales were up 5.8% for the Family Dollar segment.
Dollar Tree's (DLTR) gross margin improved 70 basis points to 30.9% of sales. The improvement was driven by higher initial mark-on and lower freight costs, partially offset by a product mix shift to lower-margin consumable products, as well as higher shrink and markdowns.
Operating income increased 6.8% to $618.1M.
The retailer opened 123 new stores during the quarter, relocated 38 stores, and closed 77 stores.
Looking ahead, Dollar Tree (DLTR) sees full-year EPS of $6.30 to $6.80 vs. $7.62 consensus. DLTR expects gross and operating margins will decline in the first half of FY23, followed by expansion for the second half.
Shares of Dollar Tree (DLTR) fell 2.15% in premarket action to $141.85.