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Disappointing Q3 Profit Sends Dollar Tree 17% Lower Tuesday Morning

By Daniel Miller - Nov 26, 2019 at 1:43PM

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Dollar Tree continued its string of same-store sales gains, and topped sales estimates -- but here's what's dragging the stock lower.

What happened

Shares of Dollar Tree ( DLTR 0.12% ), a leading operator of discount stores under its namesake and Family Dollar brands, plunged as much as 17% lower during Tuesday morning trading after the company released disappointing third-quarter results.

So what

Dollar Tree's third-quarter sales increased 3.7% to $5.75 billion, slightly topping analysts' estimates of $5.74 billion. Earnings per share checked in at $1.08, at the low end of management's guidance range between $1.07 and $1.16 per share, but below analysts' estimates of $1.13 per share. Same-store sales continued a recent string of gains with a 2.5% increase, bolstered by rising average ticket and transaction volume, but comps were still short of the 2.6% growth analysts projected.

Said Gary Philbin, president and CEO, in a press release: "Our store optimization efforts and sales driving initiatives are working. The teams have completed more than 1,150 Family Dollar H2 renovations, nearly 200 Dollar Tree rebanners, more than 1,000 Dollar Tree Snack Zones and launched our Dollar TreePlus! test already this year."

Store aisle displaying pens, markers, and related products

Image source: Getty Images.

Now what

As you can see in the chart below, it's been an up-and-down year for Dollar Tree investors: The company trudged through trade and tariff uncertainty, a global helium shortage, and a consolidation of two store support centers. It's complicated out there for retailers.

DLTR Chart

DLTR data by YCharts.

One development weighing on the stock price today was management revising its fourth-quarter earnings per share, to a range of $1.70 to $1.80, in part due to a $19 million increase in cost of goods (assuming tariffs are fully implemented). This is well below analyst estimates of $2.02 per share.

Investors will now look to see if management can offset more of the tariff impact through lower costs from suppliers, and await positive impacts down the line from its planned 1,000 Family Dollar H2 renovations for fiscal 2020.

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Dollar Tree, Inc.
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