What happened

Tim-berrrr! Shares of Dollar Tree (DLTR -3.29%) stock are tumbling 10.4% as of 9:55 a.m. EDT Thursday after the retail chain reported a mixed quarter featuring better-than-expected earnings but worse-than-expected sales.

Heading into the second quarter, analysts had forecast Dollar Tree would earn $1.01 per share -- and management beat that, reporting $1.23 per share instead. The problem is, sales that were supposed to come in at $6.44 billion turned out to be only $6.34 billion instead.  

Cue sell-off.

Lumberjack cutting down a tall tree.

Image source: Getty Images.

So what

Dollar Tree managed to grow its earnings 12% year over year despite growing sales only 1% -- pretty impressive, especially with same-store sales declining more than 1%. Management attributed the improvement largely to a 150-basis-point slimming of its selling, general, and administrative expenses, which offset declining gross profit margin

Nevertheless, CEO Michael Witynski worried aloud over "continuing and well-publicized challenges in the global supply chain, as well as higher freight costs and other inflationary pressures" that are pressuring the company's margins.

Now what

And those concerns bled into the company's outlook for Q3 2021, as well as for the full year fiscal 2021. In Q3, management forecasts sales ranging as high as $6.52 billion -- comfortably ahead of Wall Street estimates -- but profits of only $0.88 to $0.98 per share -- well below analyst forecasts for $1.26.

Similarly for the year, Dollar Tree thinks sales could conceivably exceed analyst expectations for $26.4 billion in annual revenue. Earnings, however, will be only $5.40 to $5.60 per share, as freight costs continue to surge higher. That's as much as $0.45 per share below what the company previously promised, and far short of Wall Street's hoped-for $5.99.

And that, in an acorn's shell, is why Dollar Tree shares are down today.