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Dollar Tree Sees Tariffs Pressuring Profitability in 2020

By Demitri Kalogeropoulos - Mar 4, 2020 at 11:17AM

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The discount retailer just issued a cautious earnings outlook for the first half of the year.

On Wednesday, Dollar Tree (DLTR 1.74%) announced mixed results for the fiscal fourth quarter that includes the key holiday shopping season. The discount retailer paired that news with a conservative outlook for 2020.

A couple shopping in a mall.

Image source: Getty Images.

What happened?

Sales at existing locations, known as comps, rose 1.4% in the Dollar Tree segment and fell by less than 1% at Family Dollar. Overall, comps were up 0.4%, putting the chain behind most industry peers. Walmart notched an increase over 2%, for example, and Ross Stores grew comps by 4% in the fourth quarter. Dollar Tree also noted weaker profitability thanks to higher tariff payments and increased labor costs. Yet earnings landed near the top of the outlook range management had issued.

What's next?

Dollar Tree's 2020 outlook predicts further sales gains ahead, but also described several major headwinds to the business. Chief among these are tariff charges, which are set to pressure earnings by nearly $50 million in the first half of the year. The retailer expects profit trends to improve later in the year, leading to earnings of between $4.80 per share and $5.15 per share compared to $4.76 per share in 2019.

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