Dollar Tree dips on lackluster EPS forecast, inflation concerns (update)
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Dollar Tree (NASDAQ:DLTR) posted a stronger than expected Q3 report and raised sales guidance in to year-end, but dampened profit expectations.
For the third quarter, Q3 GAAP EPS of $1.20 came in $0.03 above the analyst consensus, while an 8.1% jump in revenue from the prior year to $6.94B came in $100M above expectations. Enterprise same-store sales increased 6.5% as well, exceeding the 4.73% expectation on Wall Street.
Additionally, gross margin expanded 240 basis points from the prior year quarter despite a jump in merchandise inventories to $5.66B from $4.37B at the close of Q3 2021.
âOur third quarter sales performance reflects the timely execution of merchandising initiatives to drive our consumables business in this uncertain and inflationary environment. Same-store sales for both segments improved from the prior quarter and delivered a sequential monthly improvement throughout the quarter,â CEO Mike Witynski commented. âShoppers are responding to our new value proposition at Family Dollar and Dollar Tree as we focus on driving both traffic and store productivity.â
The discount retailer raised its full-year sales outlook based upon the better than expected Q3 results and confidence into the close of 2022. The retail chain now expects net sales to range from $28.14B to $28.28B for the full-year, up from a prior outlook range of $27.85B to $28.10B. The new forecast is also above the $28.05B anticipated by analysts. 
However the forecast of EPS guidance toward the lower end of a $7.10 to $7.40 range suggests disappointment against the analyst consensus of $7.29. The consensus EPS estimate had also been reeled in significantly in the 90 days ahead of earnings, seeing 23 downward revisions.
Wells Fargo analyst Edward Kelly warned that the guide suggests below consensus Q4 profits, indicating elevated inflationary impacts. 
âWe continue to believe there is risk to the 2023 outlook as management positions the company to capture the multi-year opportunity ahead,â he told clients on Tuesday. âRising macro pressure only adds another headwind to navigate.â
Shares of the Virginia-based retailer dipped 8.77% shortly after Tuesday's opening bell.
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